 Coût des fluctuations autour d'un produit naturel sous-optimalXavier Fairise (), Jean-Olivier Hairault and Francois Langot Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL Abstract: New-Keynesian macroeconomics usually provides recommendations for monetary policy in an economy where a subsidy eliminates the mark-up at the steady state: the natural output is then optimal. In this paper, we propose to study the fluctuations around an inefficient natural output. We show that the cost of business cycles is usually underestimated. As monopolists, firms seek to preserve their expected mark-up: the interplay between the price setting by each firm and aggregate fluctuations leads to lower consumption and employment than their counterparts in an economy with flexible prices. The cost of fluctuations increases with the degree of the distortions at the steady state. However, when the utility function is iso-elastic, the optimal monetary policy is not changed: targeting zero inflation is still desirable and leads to replicate the flexible-price allocation. Keywords: Business Cycle; Consumption; Cycle; Employment; Fluctuation; Inflation; Macroeconomics; Monetary; Monetary Policy; New Keynesian; Policy; Prices; Zero Inflation (search for similar items in EconPapers) Published in Revue d'économie politique, 2012, 122 (6), pp.887-902 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-00966031 Access Statistics for this paper More papers in Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.