Second-order approximation to the Rotemberg model around a distorted steady state
AbstractSocial welfare objectives are investigated when changing prices is costly (Rotemberg, 1982). A quadratic welfare function is derived, with a distorted steady state, implying inflation and output stabilization goals. Economic distortions influence inflation aversion in a way that differs from Calvo models.
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Bibliographic InfoArticle provided by Elsevier in its journal Economics Letters.
Volume (Year): 110 (2011)
Issue (Month): 2 (February)
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Web page: http://www.elsevier.com/locate/ecolet
Price stickiness Rotemberg model Costly price adjustment;
Other versions of this item:
- Damjanovic, Tatiana & Nolan, Charles, 2010. "Second-Order Approximation to the Rotemberg Model around a Distorted Steady State," SIRE Discussion Papers 2010-31, Scottish Institute for Research in Economics (SIRE).
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