Similarly, a positive shock to aggregate demand that raised inflation to the upper end of the range might cause a rise in expected inflation and thus a decline in the real interest rate, which would provide further stimulus to the economy. The result would then be more pronounced swings in economic activity. Nonlinearities and macroeconomic stability.
Third, if a central bank places a high degree of emphasis on the boundaries of the comfort zone, then these threshold effects imply nonlinearities in the conduct of monetary policy that are likely to produce less desirable economic outcomes (Orphanides and Wieland, 2000).