This paper considers the performance of average inflation targeting (AIT) policy in a New Keynesian model with adaptive learning agents. Our analysis raises concerns regarding robustness AIT when agents have imperfect knowledge. In particular, target steady state can be locally unstable under if details about are not publicly available. Near low interest rates at zero lower bound, does necessar...

Yes, they would. In a randomized control trial, we provide groups of respondents from the Bundesbank Online Panel Households with information about hypothetical alternative ECB monetary policy regime akin to Federal Reserve’s flexible average inflation targeting (AIT). Inflation expectations significantly increase for treated individuals. When additional near-term inflation, low levels trust in...

Using a daily survey of U.S. households, we study how the Federal Reserve’s announcement its new strategy average inflation targeting affected households’ expectations. Starting with day announcement, there is very small uptick in minority households reporting that they had heard news about monetary policy relative to prior but this effect fades within few days. Those hearing do not seem have u...