A key policy question is: How high an inflation rate should central banks target? This depends crucially on the costs … of inflation. An important concern is that high inflation will lead to inefficient price dispersion. Workhorse New … Keynesian models imply that this cost of inflation is very large. An increase in steady state inflation from 0% to 10% yields a …

-run Phillips curve which relates average output gap to average wage inflation: it is virtually vertical at high inflation and … flattens at low inflation. Macroeconomic volatility shifts the curve outward and reduces output. The results imply that … stabilization policies play an important role, and that optimal inflation may be positive and differ across countries with different …

This paper analyzes the long-run determinants of inflation differentials in a monetary union. First, we aim at … establishingsome stylized facts relating the regional dispersion in headline inflation rates in the euro area as well as in the main … the primary cause of price and inflation differentials, with shocks to productivity in the traded sector being largely …

adjustment. As a result, the response of inflation to nominal shocks is both sluggish and hump-shaped. The model can also … qualitatively capture a number of stylized facts about price setting at the micro level and inflation at the macro level …

relates average unemployment to average wage inflation; the curve is virtually vertical for high inflation rates but becomes … flatter as inflation declines. Second, macroeconomic volatility shifts the Phillips curve outward, implying that stabilization …, at low inflation. Fourth, when inflation decreases, volatility of unemployment increases whereas the volatility of …

survey-based experiment obtained during a period of government manipulation of inflation statistics in Argentina (2006 …-2015). This period is interesting because of the attention to inflation information and the availability of both official and … extract all its useful content. We also find evidence of an asymmetric reaction to inflation signals, with expectations …

We study the effects of positive steady-state inflation in New Keynesian models subject to the zero bound on interest … rates. We derive the utility-based welfare loss function taking into account the effects of positive steady-state inflation … and show that steady-state inflation affects welfare through three distinct channels: steady-state effects, the magnitude …

Observed inflation targets around the industrial world are concentrated at two percent per year. This chapter … investigates the extent to which the observed magnitudes of inflation targets are consistent with the optimal rate of inflation … inflation ranges from minus the real rate of interest to numbers insignificantly above zero. Furthermore, we argue that the zero …