Gaspar, Vítor; Smets, Frank; Vestin, David - European Central Bank - 2007
level path stability (PLPS). Using a standard hybrid new Keynesian model we argue that price level stability provides a … helps overall macroeconomic stability by making expectations operate like automatic stabilizers. Second, under a price level … path stability regime, changes in the price level operate like an intertemporal adjustment mechanism, reducing the …