We study the properties of the optimal nominal interest rate policy under different levels of price indexation. In our … model indexation regulates the sources of inflation persistence. When indexation is zero, the inflation gap is purely … forward- looking and inflation persistence depends only on the level of trend inflation, while full indexation makes the …

This paper introduces adaptive learning and endogenous indexation in the New-Keynesian Phillips curve and studies … episode price-setting firms' expect inflation to be highly persistent and opt for backward-looking indexation. As the central … that choose the rate for indexation also re-assess the likelihood that announced inflation targets determine steady …