Cespedes, Luis Felipe; Kumhof, Michael; Parrado, Eric - In: Macroeconomic Dynamics 16 (2012) 04, pp. 576-604
The paper proposes a New Keynesian monetary model where firms' pricing policies feature a forward-looking optimal choice of the rate of price growth. The model can be thought of as a reduced form model of rational inattention that has only one additional state variable relative to the Calvo...