As inflation rates in the United States decline, analysts are asking if there are economic reasons to hold the rates at levels above zero. Previous studies of whether inflation "greases the wheels" of the labor market ignore inflation's potential for disrupting wage patterns in the same market....

This paper discusses how optimal monetary policy is affected by differences in the combination of shocks an economy experiences and the rigidities it exhibits. Without both nominal rigidities and economic shocks, monetary policy would be irrelevant. Recognizing this, policymakers increasingly...

As inflation rates in the United States decline, analysts are asking if there are economic reasons to hold the rates at levels above zero. A study of inflation's effects on the labor market suggests that low rates of inflation do help the economy to adjust to changes in labor supply and demand....

This paper discusses how optimal monetary policy is affected by differences in the combination of shocks an economy experiences and the rigidities it exhibits. Without both nominal rigidities and economic shocks, monetary policy would be irrelevant. Recognizing this, policymakers increasingly...