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-constrained consumers' access to financial markets make demand insensitive to interest rate fluctuations. The demand of credit … price sector influence aggregate demand and, for monetary policy to have its desired effect, the central bank has to …
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-constrained consumers' access to financial markets make demand insensitive to interest rate fluctuations. The demand of credit … price sector influence aggregate demand and, for monetary policy to have its desired effect, the central bank has to …
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In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. We develop a two-sector two-good new-Keynesian model to study the optimal choice of price index in markets with financial frictions. We find that,...
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