Anand, Rahul; Prasad, Eswar - Institute for the Study of Labor (IZA) - 2010
In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating … stabilize price movements in the flexible price sector. Also, in the presence of financial frictions, stabilizing core inflation … rather than core inflation, and with some weight on the output gap. We discuss why these results are particularly relevant …