Schmitt-Grohé, Stephanie; Uribe, Martín - 2021
-interest-rate targeting rule. That is, an interest-rate feedback rule featuring a unit inflation coefficient, a mute response to output, and … no interest-rate smoothing. Contrary to existing studies, we find a significant degree of optimal inflation volatility. A … key factor driving this result is the assumption of indexation to past inflation. Under indexation to long-run inflation …