Optimal policy with dispersed information and uncertain monetary transmission

Gianluca Femminis and Giulio Piccirilli

Economics Letters, 2023, vol. 229, issue C

Abstract: In a setting with dispersed information, monopolistic competition and sticky-prices, a policy authority uncertain about the monetary transmission mechanism reacts prudently to supply shocks. This induces producers to ascribe an excessive importance to their private information when setting prices. To correct the ensuing inefficiency a state-contingent fiscal policy is required.

Keywords: Monetary transmission; Fiscal policy; Parameter uncertainty (search for similar items in EconPapers)
JEL-codes: D82 E52 H21 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:229:y:2023:i:c:s016517652300229x

DOI: 10.1016/j.econlet.2023.111204

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