Monetary policy volatility linked to rising inflation, impacting economic stability.
The study looks at how uncertainty in the economy affects inflation, using a model with a central bank that prefers to keep inflation low. The researchers found that when the central bank is uncertain about the economy, changes in how they manage money can lead to higher inflation. They also discovered that the central bank tends to be more concerned about stopping inflation from getting too high than from getting too low. This means that the central bank's actions can help keep the economy stable.