In the Eurozone price stickiness differs among countries. I explore its consequences on the optimal rate of inflation … in a two-country model. On the one hand, with local currencies an inflation tax is partly imposed on the foreign country … optimal inflation is positive, ii) in a monetary union the first motive is absent and the optimal inflation is negative and …

output and inflation, as observed in a vectorautoregression analysis. In contrast to backward indexation to past inflation …, which is often assumed in the literature, sticky information leads to a hump-shaped response in the inflation of flexibly … priced goods. Finally, the estimated information stickiness through the minimum-distance estimation method suggests that …