CANCELLED! Galo Nuno, Banco de España

"Monetary Policy with Supply Regimes"

Abstract

This paper analyzes optimal monetary policy in a New Keynesian model with supply regimes - periods of persistently higher costs due to tariffs, wars, or geopolitical fragmentation. We compute the optimal policy globally using deep learning. Under commitment, the central bank tolerates temporary inflation without reversing past price increases. Under discretion, high-cost regimes generate an inflationary bias, as they create incentives for monetary stimulus that raise inflation expectations. Standard Taylor rules fail to stabilize long-run inflation because regime shifts alter the natural rate. We further extend the analysis to state-dependent pricing.

Co-authors: Philipp Renner (University of Lancaster) and Simon Scheidegger (University of Lausanne)

For more information about Galo Nuno and his interesting work - link to his website.

Contact person: Brigitte Hochmuth