Is monetary policy less effective at stimulating investment during periods of elevated volatility (when all firms … experience an increase in the variance of their productivity shocks) than during normal times? In this paper, I argue that … elevated volatility leads to a decrease in extensive margin investment incentive so that nominal stimulus generates less …

I study the effect of the trending relative price of investment on the optimal target rate of inflation. The price of … investment has a decreasing trend relative to that of consumption because of investment-specific technological progress. If the … prices of investment goods are sticky, a benevolent planner puts weight on stabilizing those prices, which works to raise the …