Banking Competition, Collateral Constraints, and Optimal Monetary Policy
University of Valencia; Banco de Espana; Banco de Espana
New Keynesian DSGE model with two distinct financial frictions: monopolistically competitive banks charging endogenous lending spreads (Salop spatial competition model), and collateral constraints on entrepreneurs. Features households (savers) 
entrepreneurs: perfect competition, Cobb-Douglas production with labor and commercial real estate; final goods producers: monopolistic competition with Calvo pricing
Ramsey optimal long-run gross rate of inflation is πss = 1 (zero net inflation), regardless of whether the steady state is assumed to be efficient or not
Authors state in footnote 21 that the Ramsey optimal long-run gross rate of inflation is πss = 1, which is the main theoretical result for optimal steady-state inflation