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This paper addresses whether the Friedman rule can be optimal in an economy in which the Tobin effect is operative. We present an overlapping generations economy with capital in which limited communication and stochastic relocation create an endogenous transaction role for fiat money. We assume...
Persistent link: https://www.econbiz.de/10005420502
Market analysts often forecast changes in stock prices by comparing earnings-price ratios on stocks to nominal interest rates. This paper shows that stock prices have followed inflation more closely than interest rates over the last thirty years. This result has implications for recent stock...
Persistent link: https://www.econbiz.de/10005515016
Many researchers find a positive relationship between inflation and the variability of relative prices within aggregate price indices. This paper looks at the relationship between inflation and the variability of relative prices for three categories of the consumption deflator: durable goods,...
Persistent link: https://www.econbiz.de/10005515023
What is the correctly measured inflation rate that monetary policy should aim for in the long-run? This paper characterizes the optimal inflation rate for the U.S. economy in a New Keynesian sticky-price model with an occasionally binding zero lower bound on the nominal interest rate. Real-rate...
Persistent link: https://www.econbiz.de/10005515043
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In inflation targeting (IT) regimes, the Monetary Authority announces an explicit objective, the target for inflation. However, other objectives that possibly conflict with the inflation goal are present, such as keeping output close to its potential level and the stability of financial markets....
Persistent link: https://www.econbiz.de/10005410707
This paper studies the time variation of the Federal Reserve’s inflation target between 1960 and 2004 using both macro and yield curve data. I estimate a New Keynesian dynamic stochastic general equilibrium model in which the inflation target follows a random-walk process. I compare estimation...
Persistent link: https://www.econbiz.de/10005410723
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