DP7644 Monetary Misperceptions, Output and Inflation Dynamics
|Author(s):||Fabrice Collard, Harris Dellas|
|Publication Date:||January 2010|
|Keyword(s):||inflation inertia, measurement error, Monetary misperceptions|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=7644|
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.