Monetary policy and core inflation

Michele Lenza

No 837, Working Paper Series from European Central Bank

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. JEL Classification: E43, E52, E58

Keywords: core inflation; elasticity of intertemporal substitution; heterogeneity; nominal rigidity (search for similar items in EconPapers)
Date: 2007-12
Note: 411196
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Citations: View citations in EconPapers (1)

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Working Paper: Monetary policy and core inflation (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2007837

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