The relative prices of different categories of consumption goods have been trending over time. Assuming they are … exogenous with respect to monetary policy, these trends imply that monetary policy cannot stabilize the prices of all … consumption categories. If prices are sticky, monetary policy then must trade off relative price distortions within different …

multiplicity is a form of policy complementarity. Specifically, prices set in the current period embed expectations about future … policy, and actual future policy responds to these same prices. For a range of values of the fundamental state variable — a … ratio of predetermined prices — there is complementarity between actual and expected policy, and multiple equilibria occur …

competitive firms face fixed costs of changing the nominal prices of final goods. These prices are thus changed infrequently and …