Discussion Paper Details

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Title: Monetary Misperceptions, Output and Inflation Dynamics

Author(s): Fabrice Collard and Harris Dellas

Publication Date: January 2010

Keyword(s): inflation inertia, measurement error and Monetary misperceptions

Programme Area(s): International Macroeconomics

Abstract: We revisit the contribution of misperceived money to business cycles, and in particular to the inertial dynamics of inflation following a monetary policy shock. We establish three things. First, the difference between preliminary and revised money data captures monetary misperceptions well. Second, misperceived money is quantitatively substantial and also matters significantly for economic activity. And third, imperfect information about monetary aggregates can help the standard NK model exhibit inertial inflation dynamics.

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Bibliographic Reference

Collard, F and Dellas, H. 2010. 'Monetary Misperceptions, Output and Inflation Dynamics'. London, Centre for Economic Policy Research.