On staggered prices and optimal inflation

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Date
2019Version
Acceso abierto / Sarbide irekia
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Documento de trabajo / Lan gaiak
Project Identifier
ES/1PE/ECO2015-64330-P
Impact
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Abstract
This paper computes the steady-state optimal rate of inflation assuming two different 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 appro ...
[++]
This paper computes the steady-state optimal rate of inflation assuming two different 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. [--]
Serie
Documentos de Trabajo DE - ES Lan Gaiak /
1902
Departament
Universidad Pública de Navarra. Departamento de Economía /
Nafarroako Unibertsitate Publikoa. Ekonomia Saila /
Universidad Pública de Navarra / Nafarroako Unibertsitate Publikoa. Inarbe - Institute for Advanced Research in Business and Economics
Sponsorship
Asier Aguilera-Bravo gratefully acknowledges financial support from Fundación Banco Sabadell, Fundación Bancaria Caja Navarra and Universidad Pública de Navarra. Miguel Casares would like to acknowledge financial support from the Spanish government (research project ECO2015-64330-P).