Home production and sticky price models: Implications for monetary policy

Robert Lester ()

Journal of Macroeconomics, 2014, vol. 41, issue C, 107-121

Abstract: I analyze the consequences of including home production in a New Keynesian model with staggered price setting. Home production amplifies responses to technology and monetary policy shocks. Compared to a model without home production, the model generates close to twice the output response to a monetary policy shock. I consider the implications of several nominal interest rate rules and show that a traditional Taylor rule lacks its usual attractive properties. Alternatively, strict inflation targeting implements the constrained efficient allocation.

Keywords: Home production; Monetary policy; Taylor rule (search for similar items in EconPapers)
JEL-codes: D13 E30 E52 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:41:y:2014:i:c:p:107-121

DOI: 10.1016/j.jmacro.2014.05.002

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