Ascari, Guido - In: Review of Economic Dynamics 7 (2004) 3, pp. 642-667
Most of the papers in the sticky-price literature are based on a log-linearization around the zero inflation steady … state, a simplifying but counterfactual assumption. This paper shows that when trend inflation is considered, both the long … results obtained by models log-linearized around a zero inflation steady state are quite misleading. Furthermore, the same is …