Lower inflation : ways and incentives for central banks

Inflation (Finance)--Econometric models;Derivative securities--Prices--Mathematical models;Banks and banking, Central;Monetary policy

Geissler, Johannes ; Nolan, Charles ; Nolan, Charles

University:University of St Andrews

Department:Economics & Finance (School of)

关键词: Inflation (Finance)--Econometric models;    Derivative securities--Prices--Mathematical models;    Banks and banking, Central;    Monetary policy;   

Others  :  https://research-repository.st-andrews.ac.uk/bitstream/handle/10023/1719/JohannesGeisslerPhDThesis.pdf?sequence=3&isAllowed=y

来源: DR-NTU

【 摘 要 】

This thesis is a technical inquiry into remedies for high inflation. In its center thereis the usual tradeoff between inflation aversion on the one hand and some benefitfrom inflation via Phillips curve effects on the other hand. Most remarkable andpioneering work for us is the famous Barro-Gordon model - see (Barro & Gordon1983a) respectively (Barro & Gordon 1983b). Parts of this model form the basis ofour work here. Though being well known the discretionary equilibrium is suboptimalthe question arises how to overcome this. We will introduce four different models,each of them giving a different perspective and way of thinking. Each model showsa (sometimes slightly) different way a central banker might deliver lower inflationthan the one shot Barro-Gordon game at a first glance would suggest. To cut a longstory short we provide a number of reasons for believing that the purely discretionaryequilibrium may be rarely observed in real life.Further the thesis provides new insights for derivative pricing theories. In particular, the potential role of financial markets and instruments will be a major focus.We investigate how such instruments can be used for monetary policy. On the contrary these financial securities have strong influence on the behavior of the centralbank. Taking this into account in chapters 3 and 4 we come up with a new method ofpricing inflation linked derivatives. The latter to the best of our knowledge has never been done before - (Persson, Persson & Svenson 2006), as one of very view economicworks taking into account financial markets, is purely focused on the social planer'sproblem.A purely game theoretic approach is done in chapter 2 to change the originalBarro-Gordon. Here we deviate from a purely rational and purely one period wisethinking. Finally in chapter 5 we model an asymmetric information situation wherethe central banker faces a trade off between his current objective on the one handand benefit arising from not perfectly informed agents on the other hand. In thatsense the central bank is also concerned about its reputation.