heterogeneous inflation expectations. Expectations are updated through social dynamics and, with heterogeneity, not all firms choose … to operate, putting downward pressure on realized inflation. Our model rationalizes why countries stuck at the zero lower … bound have had a hard time increasing inflation without being aggressive. The same model also predicts that announcing an …

rule and targets a zero inflation rate, there is a significant increase in the variability of output but not inflation …

The inflation targeting policy, which is adopted in a lot of countries in recent years, has been introduced with a band … target in most countries. However, in the many theoretical analysis, the target of the inflation rate is assumed to be a … few. In this paper, to treat the above-problem, we make the inflation band targeting model which is based on Barro and …

Building on recent work in monetary theory and finance, we develop a framework where money serves a double liquidity … of inflation on welfare and asset prices. The main result of the paper is that, contrary to conventional wisdom, in our … model welfare can be increasing in inflation due to a new channel whereby higher inflation promotes beneficial trade in the …

Inflation may enhance the efficiency of the price system in the presence of nominal rigidities. For the price system to … changing prices but also on the realized shocks, it follows that the rate of inflation may affect the incentive to change … prices. The higher the rate of inflation the larger the incentive to change prices, and in the presence of real shocks …

What is the correctly measured inflation rate that monetary policy should aim for in the long-run? This paper … characterizes the optimal inflation rate for the U.S. economy in a New Keynesian sticky-price model with an occasionally binding … zero lower bound on the nominal interest rate. Real-rate and mark-up shocks jointly determine the optimal inflation rate to …

In this paper, we examine the time series properties of inflation in seven countries that have adopted inflation … targeting. Unlike previous studies, we utilize a non-linear mean reverting adjustment mechanism for inflation and we discover … that, although deviations of inflation from the target can exhibit a region of non-stationary behaviour, overall they are …