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Optimal monetary policy and the time-dependent price and wage Phillips curves: An international comparison

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  • Di Bartolomeo, Giovanni
  • Serpieri, Carolina

Abstract

We investigate the behavior of central banks in seven advanced economies, focusing on how observed monetary policies align with optimal ones as determined by model-consistent welfare measures. Our approach stands out by emphasizing the importance of inertia’s impact on the output gap and the dynamics of prices and wages. We incorporate inertia into our model using duration-dependent adjustments. By integrating this aspect into a simple New Keynesian model, our analysis aims to identify shared patterns and distinctive features in the monetary policy approach of central banks across different countries.

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  • Di Bartolomeo, Giovanni & Serpieri, Carolina, 2024. "Optimal monetary policy and the time-dependent price and wage Phillips curves: An international comparison," Journal of International Money and Finance, Elsevier, vol. 146(C).
    • Handle: RePEc:eee:jimfin:v:146:y:2024:i:c:s0261560624000986
    DOI: 10.1016/j.jimonfin.2024.103111
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    More about this item

    Keywords

    Duration-dependent adjustments; Intrinsic inflation persistence; DSGE models; Hybrid Phillips curves; Optimal policy;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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