Keynesian model we show that, if households have hyperbolic discounting, small positive rates of inflation can be optimal. In … our baseline calibration, the optimal rate of inflation is 2.1% and remains positive across a wide range of calibrations …

period. The workers' bargaining power in the hours negotiation affects both unemployment volatility and inflation persistence … cost determination. This set-up produces realistic labor market statistics together with inflation persistence …

state contingent inflation taxes/subsidies to smooth those rents. Hence, in the optimal Ramsey plan, inflation deviates from … zero and the optimal volatility of inflation is an increasing function of firing costs. The optimal rule should react to … employment alongside inflation …

Real wages are a key determinant of marginal costs. The latter themselves are a driving force of inflation. We ask how … wages and labor market shocks feed into the inflation process. We model search and matching frictions in the labour market …

In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating … stabilize price movements in the flexible price sector. Also, in the presence of financial frictions, stabilizing core inflation … frictions a welfare-maximizing central bank should adopt flexible headline inflation targeting a target based on headline rather …

- although they generate price inertia, they cannot account for the stylised fact of inflation persistence. It is thus commonly … asserted that, in the context of the new Phillips curve (NPC), inflation is a jump variable. We argue that this persistency … setting (in which real variables not only affect inflation, but are also influenced by it), standard wage-price staggering …

This paper evaluates the success of Inflation Targeting on inflation and growth on a large panel data set of both … evidence to show that the support for a successful Inflation Targeting policy is very weak or non-existent. We use various … the process by which inflation targeting is hypothesised to influence inflation and growth, Section 3 surveys this …

In closed or open economy models with complete markets, targeting core inflation enables monetary policy to maximize … is high. We develop an open economy model with incomplete financial markets to show that headline inflation targeting … headline inflation, assigns zero weight to import prices …