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Optimal Monetary Policy, Endogenous Sticky Prices, and Multiple Equilibria
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Levon Barseghyan
Veröffentlicht/Copyright:
24. Januar 2007
We analyze optimal discretionary monetary policy in an endogenous sticky prices model. Similar models with exogenous sticky prices can deliver multiple equilibria. This is a necessary condition for the occurrence of expectation traps (when private agents' expectations determine the equilibrium level of inflation). In our model, sticky-price firms are allowed to switch to flexible pricing by paying a random cost. For plausible parametrizations, our model has a unique low-inflation equilibrium. With endogenous sticky prices, the monetary authority does not validate high-inflation expectations and deviates to the Friedman rule.
Published Online: 2007-1-24
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Artikel in diesem Heft
- Topics Article
- To Pool or to Aggregate? Tests with a Dynamic Panel Macroeconometric Model of Australian State Labor Markets
- Economic Growth: A Channel Decomposition Exercise
- Liquidity Effects, Variable Time Preference, and Optimal Monetary Policy
- Optimal Monetary Policy, Endogenous Sticky Prices, and Multiple Equilibria
- A Simple Wicksellian Macroeconomic Model
- Confidence-Enhanced Economic Growth
- A Positive Analysis of Targeted Employment Protection Legislation
- The Political Economy of Numbers: On the Application of Benford's Law to International Macroeconomic Statistics
- Exchange Rate Regimes, Inflation and Growth in Developing Countries -- An Assessment
- Does Permanent Income Determine the Vote?
- Rich, Poor and Growth-Miracle Nations: Multiple Equilibria Revisited
- Savers, Spenders and Fiscal Policy in a Small Open Economy
- Assessing Sign Restrictions
- Euro Area Inflation Differentials
- Decomposing Consumer Wealth Effects: Evidence on the Role of Real Estate Assets Following the Wealth Cycle of 1990-2002
- Gold, Fiat Money, and Price Stability
- Housing Tenure and Wealth Distribution in Life Cycle Economies
- Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries
- Political Sustainability of Unfunded Pensions in an Endogenous Growth Model
- Institutional Determinants of International Equity Portfolios - A Country-Level Analysis
- Contributions Article
- The Arrow Effect under Competitive R&D
- Openness, Wage Floors and Technology Change
- Explaining the Evidence on Inequality and Growth: Informality and Redistribution
- Nominal Debt Dynamics, Credit Constraints and Monetary Policy
- TFP Differences and the Aggregate Effects of Labor Mobility in the Long Run
- A Comparison of Five Federal Reserve Chairmen: Was Greenspan the Best?
- Specialization Patterns and the Factor Bias of Technology
- Inspecting the Mechanism Exactly: A Closed-form Solution to a Stochastic Growth Model
- ICT and Productivity Resurgence: A Growth Model for the Information Age
- A Macroeconomic Model of Entry with Exporters and Multinationals
- The Response of Business Fixed Investment to Changes in Energy Prices: A Test of Some Hypotheses about the Transmission of Energy Price Shocks
- Advances Article
- Stable Sunspot Equilibria in a Cash-in-Advance Economy
- Should Monetary Policy Use Long-Term Rates?
- Habit Formation and Aggregate Consumption Dynamics
- Factor Utilization and the Real Impact of Financial Crises
