Inflation targets, credibility and persistence in a simple sticky-price framework

Jeremy Rudd and Karl Whelan ()

Open Access publications from School of Economics, University College Dublin

Abstract: An important trend in macroeconomic research in recent years involves the increased use of optimization-based models with nominal rigidities (such as sticky prices) to analyse how monetary policy affects the economy and how optimal policy should be designed. This paper presents a re-formulated version of a commonly-used baseline sticky-price model that has been extended to account for variations over time in the central bank's inflation target. We derive a closed-form solution for the model and analyse its properties under various parameter values. The model is used to explore topics relating to the effects of disinflationary monetary policies and inflation persistence. In particular, we employ the model to illustrate and assess the critique that standard sticky-price models generate counterfactual predictions for the effects of monetary policy.

Keywords: Inflation (Finance); Phillips curve; Monetary policy (search for similar items in EconPapers)
Date: 2003-08
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Citations: View citations in EconPapers (3)

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http://hdl.handle.net/10197/238 Open Access version, 2003 (application/pdf)

Related works:
Working Paper: Inflation Targets, Credibility and Persistence In a Simple Sticky-Price Framework (2003)
Working Paper: Inflation targets, credibility, and persistence in a simple sticky-price framework (2003)
Working Paper: Inflation targets, credibility, and persistence in a simple sticky-price framework (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ucn:oapubs:10197/238

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