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Inflation versus Price-Level Targeting

Bayesian Estimation of a Small Open DSGE Model for Switzerland

  • Book
  • © 2015

Overview

Authors:
  1. Lukas Heim

    1. Luzern, Switzerland

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  • Publication in the field of economic sciences
  • Includes supplementary material: sn.pub/extras

Part of the book series: BestMasters (BEST)

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Table of contents (5 chapters)

  1. Front Matter

    Pages I-XII
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  2. Introduction

    • Lukas Heim
    Pages 1-3

  3. Description of the Model

    • Lukas Heim
    Pages 5-29

  4. Bayesian Estimation of the Parameters

    • Lukas Heim
    Pages 31-46

  5. Results – Inflation versus Price-Level Targeting

    • Lukas Heim
    Pages 47-53

  6. Conclusion

    • Lukas Heim
    Pages 55-56

  7. Back Matter

    Pages 57-69
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Keywords

About this book

Lukas Heim evaluates the performance of a price-level targeting rule compared to that of a standard inflation targeting rule. The comparison is based on a medium-scale DSGE model which has been estimated based on state-of-the-art Bayesian methods. The model for the Swiss economy is an expanded version of the framework proposed by Galì and Monacelli (2005) as well as Monacelli (2005). It is enriched with habit formation in consumption, price indexation, labor market imperfections, and several additional structural disturbances. The results show that – exactly as expected – the volatility of inflation is quite significantly lower under the price-level targeting regime, whereas the volatility of the output gap is markedly higher conditional on either productivity or preference shocks. Therefore, the introduction of a price-level targeting regime would likely produce an increase in the volatility of real economic activity conditional on both supply-side and demand-side shocks. Since inflation and output are targeted simultaneously, none of the two policies is strictly dominant.

Authors and Affiliations

  • Luzern, Switzerland

    Lukas Heim

About the author

Lukas Heim obtained his MSc in International and Monetary Economics at the University of Bern. His research interests include macroeconomics, monetary economics and econometrics.

Bibliographic Information

  • Book Title: Inflation versus Price-Level Targeting

  • Book Subtitle: Bayesian Estimation of a Small Open DSGE Model for Switzerland

  • Authors: Lukas Heim

  • Series Title: BestMasters

  • DOI: https://doi.org/10.1007/978-3-658-08228-4

  • Publisher: Springer Gabler Wiesbaden

  • eBook Packages: Business and Economics, Economics and Finance (R0)

  • Copyright Information: Springer Fachmedien Wiesbaden 2015

  • Softcover ISBN: 978-3-658-08227-7Published: 01 December 2014

  • eBook ISBN: 978-3-658-08228-4Published: 20 November 2014

  • Series ISSN: 2625-3577

  • Series E-ISSN: 2625-3615

  • Edition Number: 1

  • Number of Pages: XII, 69

  • Number of Illustrations: 9 b/w illustrations

  • Topics: Economic Policy, Economic Theory/Quantitative Economics/Mathematical Methods

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