Speaker: Marco Bassetto
Affiliation: Federal Reserve Bank of Minneapolis
Date and time: Tuesday, March 18, 202514:30 (Santiago, GMT-03:00)
Location: Sala Constitucion at the Central Bank of Chile, Morandé 115, second floor.
Registration: seminarios@bcentral.cl

Abstract: This paper posits an information channel as an explanation for sudden inflations. Households saving via nominal government bonds face a choice whether to acquire costly information about future government surpluses. They trade offthe cost of acquiring information about the surpluses that back bond repayment against the benefit of a more informed saving decision. Through the information channel, small changes in the economic environment can trigger large responses in consumers’ behavior and prices. This setting explains why there can be long stretches of time during which government surpluses have large movements with little inflation response; yet, at some point, something snaps, and a sudden inflation takes off that is strongly responsive to incoming fiscal news.