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Optimal inflation for the U.S Author info | Abstract | Publisher info | Download info | Related research | Statistics Roberto M. Billi
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What is the correctly measured inflation rate that monetary policy should aim for in the long-run? This paper characterizes the optimal inflation rate for the U.S. economy in a New Keynesian sticky-price model with an occasionally binding zero lower bound on the nominal interest rate. Real-rate and mark-up shocks jointly determine the optimal inflation rate to be positive but not large. Even allowing for the possibility of extreme model misspecification, the optimal inflation rate is robustly below 1 percent. The welfare costs of optimal inflation and the lower bound are limited.>
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RWP 07-03.
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Date of creation: 2007Date of revision:
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Keywords: Inflation (Finance) ; Other versions of this item:
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
Roberto Billi, 2008.
"Price-level targeting and risk management in a low-inflation economy ,"
Research Working Paper
RWP 08-09, Federal Reserve Bank of Kansas City.
[Downloadable!]
Roberto M. Billi & George A. Kahn, 2008.
"What is the optimal inflation rate? ,"
Economic Review ,
Federal Reserve Bank of Kansas City, issue Q II, pages 5-28.
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