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

Giovanni Di Bartolomeo () and Carolina Serpieri

No 168, CIMEO Working Paper Series from Centre for Investigation and Modelling of Experimental Observations (CIMEO)

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.

Keywords: duration-dependent adjustments; intrinsic inflation persistence; DSGE models; hybrid Phillips curves; optimal policy (search for similar items in EconPapers)
JEL-codes: C11 E31 E32 (search for similar items in EconPapers)
Date: 2023-07
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Related works:
Journal Article: Optimal monetary policy and the time-dependent price and wage Phillips curves: An international comparison (2024)
Working Paper: Optimal monetary policy and the time-dependent price and wage Phillips curves: An international comparison (2024)
Working Paper: Optimal monetary policy and the time-dependent price and wage Phillips curves: An international comparison (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ter:wpaper:00168

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