Monetary policy and core inflation

Michele Lenza ()

No 2007,35, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank, Research Centre

Abstract: This paper studies optimal monetary policy responses in an economy featuring sectorial heterogeneity in the frequency of price adjustments. It shows that a central bank facing heterogeneous nominal rigidities is more likely to behave less aggressively than in a fully sticky economy. Hence, the supposedly excessive caution in the conduct of monetary policy shown by central banks could be partly explained by the existence of a relevant sectorial dispersion in the frequency of price adjustments.

Keywords: core inflation; elasticity of intertemporal substitution; heterogeneity; nominal rigidity (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: Written 2007
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Related works:
Working Paper: Monetary policy and core inflation (2007)
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