Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
10478516 | Journal of Monetary Economics | 2005 | 25 Pages |
Abstract
We investigate the case for price stability in the general version of the New Keynesian (NNS) model with capital and several shocks. The model includes, in addition to the standard imperfect competition and monetary frictions, a non-trivial, endogenous tax distortion. We find that the case for perfect price stability is not significantly weakened. Optimal policy tolerates a small amount of output gap and price variability by reacting less strongly to supply and fiscal shocks in comparison to a policy that aims at perfect price stabilization.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Fabrice Collard, Harris Dellas,