Optimal Monetary Policy in Liquidity Trap and Mixed-type Expectation Formations Based on the Rate of Price Inflation

2015 ◽  
Vol 45 (3) ◽  
pp. 241-255
Author(s):  
Shin AOKI
Keyword(s):  
Monetary Policy ◽  
Mixed Type ◽  
Optimal Monetary Policy ◽  
Price Inflation ◽  
Liquidity Trap

scholarly journals Optimal Monetary Policy in a Liquidity Trap

10.3386/w9968 ◽  
2003 ◽  
Author(s):  
Gauti Eggertsson ◽  
Michael Woodford
Keyword(s):  
Monetary Policy ◽  
Optimal Monetary Policy ◽  
Liquidity Trap

scholarly journals Currency Misalignments and Optimal Monetary Policy: A Reexamination

2011 ◽  
Vol 101 (6) ◽  
pp. 2796-2822 ◽  
Author(s):  
Charles Engel
Keyword(s):  
Monetary Policy ◽  
Open Economy ◽  
Policy Implications ◽  
Optimal Monetary Policy ◽  
Price Inflation ◽  
Pricing To Market ◽  
Local Currency ◽  
Local Currency Pricing ◽  
Target Consumer ◽  
Currency Misalignment

This paper examines optimal monetary policy in an open-economy two-country world with sticky prices under pricing to market. We show that currency misalignments are inefficient and lower world welfare. We find that optimal policy must target consumer price inflation, the output gap, and the currency misalignment. The paper derives the loss function of a cooperative monetary policymaker and the optimal targeting rules. The model is a modified version of Clarida, Galí, and Gertler (JME, 2002). The key change is that we allow pricing to market or local-currency pricing and consider the policy implications of currency misalignments. JEL: E52, F31, F41

scholarly journals Optimal Monetary Policy with Staggered Wage and Price Contracts

2019 ◽  
Vol 52 (4) ◽  
pp. 537-572
Author(s):  
Christopher J. Erceg ◽  
Dale W. Henderson ◽  
Andrew T. Levin
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Monopolistic Competition ◽  
Jel Classification ◽  
Output Gap ◽  
Optimal Monetary Policy ◽  
Price Inflation ◽  
Agent Model ◽  
Welfare Losses ◽  
Wage Inflation

Abstract We formulate an optimizing-agent model in which both labor and product markets exhibit monopolistic competition and staggered nominal contracts. The unconditional expectation of average household utility can be expressed in terms of the unconditional variances of the output gap, price inflation, and wage inflation. Monetary policy cannot achieve the Pareto-optimal equilibrium that would occur under completely flexible ­wages and prices; that is, the model exhibits a tradeoff in stabilizing the output gap, price inflation, and wage inflation. We characterize the optimal policy rule for reasonable calibrations of the model. We also find that strict price inflation targeting generates relatively large welfare losses, whereas several other simple policy rules perform nearly as well as the optimal rule. JEL Classification: E31; E32; E52

Optimal Monetary Policy at the Zero Lower Bound

2015 ◽  
Author(s):  
Costas Azariadis ◽  
James Bullard ◽  
Aarti Singh ◽  
Jacek Suda
Keyword(s):  
Monetary Policy ◽  
Lower Bound ◽  
Zero Lower Bound ◽  
Optimal Monetary Policy
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