Arbeitspapier

Inflation persistence, Price Indexation and Optimal Simple Interest Rate Rules

We study the properties of the optimal nominal interest rate policy under different levels of price indexation. In our model indexation regulates the sources of inflation persistence. When indexation is zero, the inflation gap is purely forward- looking and inflation persistence depends only on the level of trend inflation, while full indexation makes the inflation gap persistent and it eliminates the effects of trend inflation. We show that in the former case the optimal policy is inertial and targets inflation stability while in the latter the optimal policy has no inertia and targets the real interest rate. We compare our results with empirical estimates of the FED's policy in the post-WWII era.

Language: Englisch

Bibliographic citation: Series: Quaderni di Dipartimento ; No. 129

Classification: Wirtschaft
Price Level; Inflation; Deflation
Monetary Policy

Subject: Inflation Persistence
Taylor Rule
New Keynesian model
Indexation

Event: Geistige Schöpfung

(who): Ascari, Guido
Branzoli, Nicola

Event: Veröffentlichung

(who): Università degli Studi di Pavia, Dipartimento di Economia Politica e Metodi Quantitativi (EPMQ)

(where): Pavia

(when): 2010

Handle: http://hdl.handle.net/10419/95318

Last update: 10.03.2025, 11:41 AM CET

Data provider

This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Show original at data provider

Object type

Arbeitspapier

Associated

Ascari, Guido
Branzoli, Nicola
Università degli Studi di Pavia, Dipartimento di Economia Politica e Metodi Quantitativi (EPMQ)

Time of origin

2010

Other Objects (12)

Bericht

The Golden Interest Rule: Robust Simple Interest Rate Rules for the Norwegian Economy

Arbeitspapier