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 …

consensus is that real wage rigidities can be a useful mechanism to induce the inflation persistence that is absent in the … account, the results change dramatically, both qualitatively and quantitatively. Real wage rigidities imply neither inflation … inflation target of the monetary policy …

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 …

contracts and positive inflation. Workers with relatively low incomes experience envy, whereas those with relatively high … incomes experience guilt. The former seek to raise their income, and latter seek to reduce it. The greater the inflation rate …, a rise in the inflation rate leads workers to supply more labor over the contract period, generating a significant …

reaction theory (CRT), should be used to jointly explain the evolution of inflation and unemployment. A further attraction of …The conventional wisdom that inflation and unemployment are unrelated in the long-run implies the compartmentalisation … of macroeconomics. While one branch of the literature models inflation dynamics and estimates the unemployment rate …

inflation and unemployment. We focus on the G7 economies plus Spain, and use monthly data –high-frequency data in a macro …

chain reactions, and provides new evidence on the long-run inflation-unemployment tradeoff in the US. It is argued that … inflation/unemployment responses to money growth shocks. SVAR (structural vector autoregression) and GMM (generalised method of … and real sides of the economy are symbiotic. In the light of the significant and robust long-run inflation …