Second-order approximation to the Rotemberg model around a distorted steady state

Social welfare objectives are investigated when changing prices is costly (Rotemberg, 1982). A quadratic welfare function is derived, with a distorted steady state, implying inflation and output stabilization goals. Economic distortions influence inflation aversion in a way that differs from Calvo models.

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Year of publication:	2011
Authors:	Damjanovic, Tatiana ; Nolan, Charles
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 110.2011, 2, p. 132-135
Publisher:	Elsevier
Keywords:	Price stickiness Rotemberg model Costly price adjustment

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008866839