Senay, Ozge; Sutherland, Alan - Centre for Dynamic Macroeconomic Analysis, University … - 2010
Much of the literature on optimal monetary policy uses models in which the degree of nominal price flexibility is … exogenous. There are, however, good reasons to suppose that the degree of price flexibility adjusts endogenously to changes in … flexibility. The model shows that endo?genising the degree of price flexibility tends to shift optimal monetary policy towards …