On Staggered Prices and Optimal Inflation

Asier Aguilera-Bravo and Miguel Casares

Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra from Departamento de Economía - Universidad Pública de Navarra

Abstract: This paper computes the steady-state optimal rate of inflation assuming two di erent sticky-price specifications, Calvo (1983) and Taylor (1980), in a model with monopolistic competition. The optimal rate of inflation in steady state is always positive. This result is robust to changes in the degree of price stickiness. In both cases of staggered prices, the optimal rate of inflation is approximately equal to the ratio between the rate of discount and the Dixit-Stiglitz elasticity.

Keywords: Monopolistic Competition; Sticky Prices; Optimal Inflation (search for similar items in EconPapers)
JEL-codes: E12 E31 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2019
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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