Adam Smith Business School

Professor Dmitriy Sergeyev, Bocconi University

"Zero Lower Bound on Inflation Expectations"
Thursday, 07 November 2024. 15:00-16:30
Seminar Room 2 (G53), Kelvin Hall

Abstract

We document a new fact: in U.S., European and Japanese surveys, households do not expect deflation, even in environments where persistent deflation is a strong possibility. This fact stands in contrast to the standard macroeconomic models with rational expectations. We extend a New Keynesian model with a zero-lower bound on inflation expectations. Unconventional monetary policies, such as forward guidance, are weaker. In liquidity traps, the government spending output multiplier is finite, and adverse aggregate supply shocks are not expansionary. A confidence-driven liquidity trap steady state with deflation does not exist.

Bio

Dmitriy Sergeyev is an Associate Professor in the Department of Economics at Bocconi University and a research affiliate at IGIER and CEPR (London). His research interests include Macroeconomics, Behavioral Macroeconomics, and International Finance. Recently, he has studied how systematic monetary policy influences the propagation of macroeconomic shocks, such as oil supply disruptions, government purchases, and changes in government revenue, as well as how non-rational human behavior impacts the effectiveness of fiscal and monetary policy. He has published academic papers in the Review of Economic Studies, the American Economic Journal: Macroeconomics, and the Journal of Monetary Economics.

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First published: 21 October 2024