Inflation Persistence, Backward-Looking Firms, and Monetary Policy in an Input-Output Economy
Author | : Brad E. Strum |
Publisher | : DIANE Publishing |
Total Pages | : 39 |
Release | : 2011-04 |
ISBN-13 | : 9781437980233 |
ISBN-10 | : 1437980236 |
Rating | : 4/5 (36 Downloads) |
Download or read book Inflation Persistence, Backward-Looking Firms, and Monetary Policy in an Input-Output Economy written by Brad E. Strum and published by DIANE Publishing. This book was released on 2011-04 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the implications of inflation persistence (generated by backward-looking price setters) for monetary policy in a New Keynesian "input-output" model -- a model with sticky prices in both intermediate and final goods sectors. Optimal policy under commitment depends on the degree of inflation persistence in both sectors. Under discretion, speed-limit targeting -- targeting the change in the output gap -- outperforms price-level and inflation targeting in the presence of inflation persistence. If inflation persistence is low in the intermediate goods sector, price-level targeting outperforms in inflation targeting despite high inflation persistence in the final goods sector. Illus. This is a print on demand edition of an important, hard-to-find publication.