Roc Armenter : Research

I show that the short-term nominal interest rate can anchor private-sector expectations into low inflation---more precisely, into the best equilibrium reputation can sustain. I introduce nominal asset markets in an infinite horizon version of the Barro-Gordon model. I then analyze the subset of sustainable policies compatible with any given asset price system at date t=0.

The B.E. Journal of Macroeconomics, 9(1), art. 35. With Martin Bodenstein.

With Martin Bodenstein.

The Barro-Gordon inflation bias has provided the most influential argument for fixed exchange rate regimes. However, with low inflation rates widespread, credibility concerns seem no longer relevant. Why give up independent monetary policy to contain an inflation bias that is already under control? We argue that credibility problems do not end with the inflation bias and they are a larger drawback for flexible exchange rates than usually thought.

Journal of Money, Credit and Banking, 40 (5), pp. 867-896.

with Martin Bodenstein, Macroeconomic Dynamics, 12 (5), pp. 664 -693.