Replication data for: Optimal Inflation for the US Economy

Name	File Type	Size	Last Modified
table2			10/12/2019 09:13:PM
table3			10/12/2019 09:14:PM
table4			10/12/2019 09:13:PM
makefigure1.m	text/plain	2.3 KB	10/12/2019 05:13:PM
maketable2.m	text/plain	748 bytes	10/12/2019 05:14:PM
maketable3.m	text/plain	579 bytes	10/12/2019 05:13:PM
maketable4.m	text/plain	746 bytes	10/12/2019 05:14:PM
maketable5.m	text/plain	735 bytes	10/12/2019 05:13:PM
notes.pdf	application/pdf	155 KB	10/12/2019 05:14:PM
readme.pdf	application/pdf	15.3 KB	10/12/2019 05:13:PM

Project Description

Summary: This paper studies the optimal long-run inflation rate (OIR) in a small New Keynesian model, where the only policy instrument is a short-term nominal interest rate that may occasionally run against a zero lower bound (ZLB). The model allows for worst-case scenarios of misspecification. The analysis shows first, if the government optimally commits, the OIR is below 1 percent annually. Second, if the government re-optimizes each period, the OIR rises markedly to 17 percent. Third, if the government commits only to an inertial Taylor rule, the inflation bias is eliminated at very low cost in terms of welfare for the representative household. (JEL E12, E31, E43, E52, E58)

Scope of Project

JEL Classification:
      E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
      E31 Price Level; Inflation; Deflation
      E43 Interest Rates: Determination, Term Structure, and Effects
      E52 Monetary Policy
      E58 Central Banks and Their Policies

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Published Versions

V1 [2019-10-12]

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