Coibion, Olivier; Gorodnichenko, Yuriy; Wieland, Johannes F. - National Bureau of Economic Research (NBER) - 2010
We study the effects of positive steady-state inflation in New Keynesian models subject to the zero bound on interest … of inflation in the model and find that, for plausible calibrations, the optimal inflation rate is low, less than two … of the coefficients in the utility-function approximation, and the dynamics of the model. We solve for the optimal level …