This paper examines how price setting plays a key role in explaining the steady-state effects of inflation in a … adjusted by the rate of inflation. We found that in an economy with less indexed prices the steady-state negative impact of … inflation on output is higher. In the extreme case without no price indexation at all (purely Calvo-type economy …

This paper investigates the welfare effects of inflation in economies with search frictions and menu costs. We first … condition under which price stability is optimal and a condition under which positive inflation is desirable. We relate these … inflation rate is negative for all our numerical examples. A deviation from the Friedman rule can be optimal depending on the …

-zero trend inflation. We characterize the fiscal and monetary policies by a rule whereby a given fraction k of the government … measured by (1 k), is positively related to trend inflation, and 2) when prices are sticky, k has significant effects on the … degrees of fiscal dominance. -- Economic models ; Fiscal policy ; Inflation: costs and benefits ; Monetary policy framework …

. Motivated by the case of an unanticipated inflation episode, we consider redistribution shocks that shift resources from old to …