Optimal monetary policy in an economy with real rigidity
AbstractSeveral studies address the importance of the effect of real rigidity on macroeconomic variables. The presence of real rigidity might change the property of optimal monetary policy suggested by the canonical new Keynesian model. We examine optimal monetary policy in an economy with real rigidity. According to our simulation results, the welfare gain associated with a commitment policy declines as the degree of real rigidity increases. This paper also finds that price level targeting is an effective policy regime when real rigidity is present.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 32 (2012)
Issue (Month): 3 ()
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Real rigidity; Optimal monetary policy; Commitment; Discretion; Targeting regimes;
Find related papers by JEL classification:
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Carl E. Walsh, 2010. "Monetary Theory and Policy, Third Edition," MIT Press Books, The MIT Press, edition 3, volume 1, number 0262013770, June.
- Jón Steinsson, 2000.
"Optimal monetary policy in an economy with inflation persistence,"
wp11, Department of Economics, Central bank of Iceland.
- Steinsson, Jon, 2003. "Optimal monetary policy in an economy with inflation persistence," Journal of Monetary Economics, Elsevier, vol. 50(7), pages 1425-1456, October.
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