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Seasonality in the Frequency of Price Change and Optimal Monetary Policy

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  • Söderberg, Johan

    (Dept. of Economics, Stockholm University)

Abstract

The implications for optimal monetary policy of introducing seasonality in the frequency of price change in the baseline New Keynesian model are studied. In the resulting model, both the parameters of the Phillips curve and the weight on inflation stabilization in the welfare criterion vary seasonally. I show that for a plausible calibration, even a modest degree of seasonality in the frequency of price change gives rise to large seasonal differences in the equilibrium responses of the output gap and inflation to cost-push shocks. The effects on welfare, however, are small under both discretionary and commitment policy.

Suggested Citation

  • Söderberg, Johan, 2015. "Seasonality in the Frequency of Price Change and Optimal Monetary Policy," Research Papers in Economics 2015:11, Stockholm University, Department of Economics.
    • Handle: RePEc:hhs:sunrpe:2015_0011
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    File URL: http://www2.ne.su.se/paper/wp15_11.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Price Setting; Staggering; Seasonality; Optimal Monetary Policy;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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