Replication data for: Optimal Trend Inflation
Principal Investigator(s): View help for Principal Investigator(s) Klaus Adam; Henning Weber
Version: View help for Version V1
| Name | File Type | Size | Last Modified |
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| replication_files | 10/12/2019 07:21:AM | ||
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text/plain | 14.6 KB | 10/12/2019 03:21:AM |
Project Citation:
Adam, Klaus, and Weber, Henning. Replication data for: Optimal Trend Inflation. Nashville, TN: American Economic Association [publisher], 2019. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-12. https://doi.org/10.3886/E113191V1
Project Description
Summary:
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Sticky price models featuring heterogeneous firms and systematic firm-level productivity trends deliver radically different predictions for the optimal inflation rate than their popular homogenous-firm counterparts: (i) the optimal steady-state inflation rate generically differs from zero and (ii) inflation optimally responds to productivity disturbances. We show this by aggregating a heterogeneous-firm model with sticky prices in closed form. Using firm-level data from the US Census Bureau, we estimate the historically optimal inflation path for the US economy: the optimal inflation rate ranges between 1 percent and 3 percent per year and displays a downward trend over the period 1977–2015.
Scope of Project
JEL Classification:
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C51 Model Construction and Estimation
D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
D25 Intertemporal Firm Choice: Investment, Capacity, and Financing
E31 Price Level; Inflation; Deflation
E52 Monetary Policy
C51 Model Construction and Estimation
D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
D25 Intertemporal Firm Choice: Investment, Capacity, and Financing
E31 Price Level; Inflation; Deflation
E52 Monetary Policy
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