Antinolfi, Gaetano; Azariadis, Costas; Bullard, James - Federal Reserve Bank of St. Louis - 2012
We formulate the central bank’s problem of selecting an optimal long-run inflation rate as the choice of a distorting … equivalent to choosing inflation and nominal interest rates consistent with a resource constraint, and with an incentive … the optimum inflation rate is positive, because inflation reduces the value of the outside option for credit agents and …