Optimal Inflation Stabilization in a Medium-Scale Macroeconomic Model
Duke University
Medium-scale New Keynesian DSGE model with Calvo sticky prices and wages with indexation, habit formation in consumption, investment adjustment costs, variable capacity utilization, money-in-utility for households, cash-in-advance constraint on
intermediate firms: monopolistic competition with Calvo pricing; final goods firms: perfect competition with CES aggregation
Figure 1 p.28
Ramsey optimal inflation at lower bound of price stickiness estimates (2 quarters), close to Friedman rule