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 … inflation gap persistent and it eliminates the effects of trend inflation. We show that in the former case the optimal policy is …

-type nominal rigidities is that the economy fluctuates around a zero-inflation steady state. While average inflation has been low … in the recent past, it certainly has not been zero. We study the impact of nonzero average inflation in an alternative … policy does not become a source of unnecessary fluctuations. In particular, we find that for low values of average inflation …

I analyze the effect of search frictions on inflation dynamics, in a New Keynesian model where firms make both pricing … empirical performance along a number of dimensions. First, inflation becomes more persistent. Second, output responses to …