We demonstrate the existence of a monetary policy tradeoff between price-inflation variability and output-gap … variability in an optimizing-agent model with staggered nominal wage and price contracts. This variance tradeoff is absent only in …

This paper examines two issues. First, we compare, based on the ratio of output-gap variability to inflation … trade-off between inflation variability and output-gap variability. We employ a stochastic volatility model for the whole …