KIM, Jinill; RUGE-MURCIA, Francisco J. - Centre Interuniversitaire de Recherche en Économie … - 2007
This paper studies Tobin's proposition that inflation "greases" the wheels of the labor market. The analysis is carried out using a simple dynamic stochastic general equilibrium model with asymmetric wage adjustment costs. Optimal inflation is determined by a benevolent government that maximizes...