rigidities impede policymakers' ability to control inflation. And third, we describe how alternative shock/rigidity combinations … monetary policymaking. First, we discuss why trimmed means provide the best measure of core inflation. Second, we outline how … create inflation's grease (whereby it improves economic efficiency by speeding adjustment) and sand effects (whereby it …

inflation and persistence in output. The key features of our model are those that prevent a sharp rise in marginal costs after … an expansionary shock to monetary policy. Of these features, the most important are staggered wage contracts of average …

response of prices is pinned down by three parameters: the precision of available information about the nominal shock; the …-order beliefs, or the agents' forecasts of inflation. We highlight the distinct role of higher-order beliefs with three extensions …

minimizing a loss function with three terms, involving measures of the variability of wage inflation, price inflation and the …

criterion of the kind discussed in familiar proposals for flexible inflation targeting.' Optimal rules, however, require that … do not place nearly as much weight on projections of inflation or output many quarters in the future as occurs under the … current practice of inflation-forecast targeting central banks …

policy analysis, researchers should use a menu cost model like ours or at least a third, theory-based shortcut: set the Calvo …