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A Note on Intrinsic Inflation Persistence and the Optimal Inflation Rate

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  • Dario Pontiggia

    (Neapolis University Pafos, 2 Danais Avenue, 8042, Pafos, Cyprus)

Abstract

This paper examines the implications of intrinsic inflation persistence, namely inertia that inflation inherits from its own past, on the conduct of optimal monetary policy. We study the optimal long-run rate of inflation in a basic New Keynesian model, which is augmented for intrinsic inflation persistence. We show that the commitment solution for the monetary authority leads to steady-state outcomes in which inflation is positive.

Suggested Citation

  • Dario Pontiggia, 2016. "A Note on Intrinsic Inflation Persistence and the Optimal Inflation Rate," Journal of Reviews on Global Economics, Lifescience Global, vol. 5, pages 248-253.
    • Handle: RePEc:lif:jrgelg:v:5:y:2016:p:248-253
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Optimal monetary policy; Phillips curve; inflation persistence.;
    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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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