Since Kydland and Prescott (1977) and Barro and Gordon (1983), most studies of the problem of the inflation bias …-quadratic approach to the problem in favor of a projection method approach. We investigate the size of the inflation bias that arises in … a microfounded nonlinear environment with Calvo price setting. The inflation bias is found to lie between 1% and 6% for …

Since Kydland and Prescott (1977) and Barro and Gordon (1983), most studies of the problem of the inflation bias …-quadratic approach to the problem in favor of a projection method approach. We investigate the size of the inflation bias that arises in … a microfounded nonlinear environment with Calvo price setting. The inflation bias is found to lie between 1% and 6% for …

Keynesian models containing each form of price stickiness. Using global solution techniques we find that the inflation bias …