Journal of money credit and banking· 2026Q1
The Power of Open‐Mouth Policies
- 0citations
- Q1SCImago
- 2026year
Short summary
A new framework for economic models with anticipated news shocks shows that policy announcements, like inflation target shifts, significantly alter agent behavior and economic outcomes.
AI-generated from the title and abstract; the full text is not read.
Key points
- Developed a novel perturbation-based extended function path framework for nonstationary economic solutions.
- The framework models agent behavior anticipating non-Markov news shocks.
- Analyzed anticipated policy rule changes (inflation targets, Taylor rule aggressiveness) in a central banking model.
- Found that announcements of temporary and permanent policy changes yield significant economic effects.
AI-generated from the title and abstract; the full text is not read.
Abstract
Abstract Economic agents adjust their behavior in anticipation of announced future policy changes. We develop a novel perturbation‐based extended function path framework to construct nonstationary solutions—time‐dependent decision functions—for economic models with anticipated, non‐Markov news shocks. We apply this framework to evaluate the anticipation effects of policy announcements within a realistically calibrated central banking model. Specifically, we analyze temporary and permanent anticipated changes to policy rules, including shifts in inflation targets and Taylor rule aggressiveness. We also examine anticipated transitions from inflation targeting to price‐level and average‐inflation targeting, finding that these announcements yield economically significant effects.
The authors' abstract, as published at the source. Journal of money credit and banking, 2026 · DOI ↗
Continue with a free account
Ask the paper: 3 free questions a day about this paper; save it, get its citation, new summaries every day for your field. Takeaways are Premium.
Continue free on the webSign in with Google or Apple; no card needed. You come back to this paper.
On your phone:
Field: General Economics, Econometrics and Finance
General Economics, Econometrics and FinanceEconomics, Econometrics and Finance