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Optimal monetary policy and the time-dependent price and wage Phillips curves: An international comparison

Author

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  • Giovanni Di Bartolomeo
  • Carolina Serpieri

Abstract

This paper analyzes the conduct of central banks in seven advanced economies by comparing observed and optimal monetary policies using model-consistent welfare measures. The study emphasizes the role of inertia in output gaps and in price and wage dynamics, modeling inertia through duration-dependent price and wage adjustments. By incorporating these mechanisms into a simple New Keynesian model, the paper derives a welfare-based criterion and performs counterfactual policy simulations under commitment and discretion. The analysis identifies common patterns and country-specific features in the conduct of monetary policy across Australia, Canada, France, Germany, Italy, the United Kingdom, and the United States.

Suggested Citation

  • Giovanni Di Bartolomeo & Carolina Serpieri, 2023. "Optimal monetary policy and the time-dependent price and wage Phillips curves: An international comparison," CIMEO Working Paper Series 168, Centre for Investigation and Modelling of Experimental Observations (CIMEO).
    • Handle: RePEc:ter:wpaper:00168
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    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
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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