This paper explores the influence of inflation on economic growth. In order to match the empirical stylized fact of a threshold level of inflation, beyond which inflation ceases to have a positive impact on growth and begins to harm it, we propose to merge an endogenous growth model of learning...

We consider the effect of money illusion - defined referring to Stevens' ratio estimation function - on the long-run Phillips curve in an otherwise standard New Keynesian model of sticky wages. We show that if households under-perceive real economic variables, negative money...

A growing body of empirical evidence shows that there exists a long-run positive tradeoff between inflation and real macroeconomic activity. Within a New Keynesian framewok, we examine how increasing returns generate a positive long-run relation between inflation and output.

A growing body of empirical evidence shows that there exists a long-run positive tradeoff between inflation and real macroeconomic activity. Within a New Keynesian framewok, we examine how increasing returns generate a positive long-run relation between inflation and output. -- Phillips curve ;...

In this paper we generalise the standard optimal monetary policy literature as in Galí (2003) to the case of positive trend inflation. We present a simple framework that provides straightforward analytical results directly comparable with the standard case. Optimal monetary policy is strongly...

This paper studies the challenge that increasing the inflation target poses to equilibrium determinacy in a medium-sized New Keynesian model without indexation fitted to the Great Moderation era. For moderate targets of the inflation rate, such as 2 or 4 percent, the probability of...