Please use this identifier to cite or link to this item: https://hdl.handle.net/2440/57708
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Type: Journal article
Title: The Case for inflation stability
Author: Collard, F.
Dellas, H.
Citation: Journal of Monetary Economics, 2006; 53(8):1801-1814
Publisher: Elsevier Science BV
Issue Date: 2006
ISSN: 0304-3932
Statement of
Responsibility: 
Fabrice Collard and Harris Dellas
Abstract: We evaluate the case for inflation stabilization in a New Keynesian (NNS) model that includes various frictions, capital accumulation and a variety of shocks. In such a model, price rigidity may provide the monetary authorities with an opportunity to improve upon the inefficient flexible price equilibrium via the suitable cyclical manipulation of real marginal costs. We find that such an opportunity is of limited value and that a strong case for perfect inflation stabilization remains. Policies that tolerate a small amount of inflation variability may outperform perfect inflation targeting when capital adjustment costs are low and the monetary distortion is substantial but only if prices are very flexible.
Keywords: Inflation stabilization
Investment
Price rigidity
Distortions
DOI: 10.1016/j.jmoneco.2005.09.002
Published version: http://dx.doi.org/10.1016/j.jmoneco.2005.09.002
Appears in Collections:Aurora harvest
Economics publications

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