In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. We develop a two-sector two-good new-Keynesian model to study the optimal choice of price index in markets with financial frictions. We find that,...

Measuring consumer responsiveness to medical care prices is a central issue in health economics and a key ingredient in the optimal design and regulation of health insurance markets. We study consumer responsiveness to medical care prices, leveraging a natural experiment that occurred at a large...