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This article examines the risks and societal costs associated with flexible average inflation targeting in the United States and symmetric inflation targeting in the Eurozone. Employing an empirical approach, we analyze monthly cumulative inflation gaps over a monetary policy horizon of 36 months. By investigating the trajectories of the cumulative inflation gaps, we find a heavy tailed distribution and a 20 percent probability of over- and undershooting the inflation target. We exhibit that the offsetting mechanism introduced in the revised monetary strategies lack credibility in ensuring price stability during a period of persistent inflation. Consequently, the credibility of central banks may be compromised. The policy implications are the integration of an escape clause and prompt monetary corrections in cases where the inflation goal is not achieved. This study provides insights for policymakers and central banks, emphasizing challenges in maintaining credibility and price stability within the new monetary strategies.
Das Buch „The Crisis of Democratic Capitalism“ von Martin Wolf ist eine gut 500-seitige Untersuchung des aktuellen Zustands des demokratischen Kapitalismus. Wolf liefert eine eingehende Analyse der Ursachen und Folgen, die zu dieser Krise geführt haben, sowie mögliche Lösungsansätze. Dieses Buch ist eine unverzichtbare Lektüre für jeden, der verstehen will, wie sich unser Wirtschaftssystem im kommenden Jahrzehnt ändern muss.
This article provides a stochastic agent-based model to exhibit the role of aggregation metrics in order to mitigate polarization in a complex society. Our sociophysics model is based on interacting and nonlinear Brownian agents, which allow us to study the emergence of collective opinions. The opinion of an agent, x i (t) is a continuous positive value in an interval [0, 1]. We find (i) most agent-metrics display similar outcomes. (ii) The middle-metric and noisy-metric obtain new opinion dynamics either towards assimilation or fragmentation. (iii) We show that a developed 2-stage metric provide new insights about convergence and equilibria. In summary, our simulation demonstrates the power of institutions, which affect the emergence of collective behavior. Consequently, opinion formation in a decentralized complex society is reliant to the individual information processing and rules of collective behavior.