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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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