Asymmetries in monetary policy
University of Bern; University of Lancaster
Standard New Keynesian model with Calvo pricing, monopolistic competition, and mark-up shocks; cubic approximation of welfare and quadratic approximation of model constraints for optimal policy analysis
intermediate firms: monopolistic competition with Calvo pricing; final firms: perfect competition with Dixit-Stiglitz aggregation
Section 5, Figure 4
Counterfactual optimal policy using second-order approximation on U.S. data 1995Q1-2019Q3; inflation centered around 2% target