Optimal Monetary Policy with Relative Price Distortions
Kookmin University; Board of Governors of the Federal Reserve System
Calvo-type staggered price-setting with relative price distortions, employment subsidy to offset monopolistic competition distortion, money as unit of account only, Ramsey optimal monetary policy
monopolistic competition, Calvo staggered price-setting, constant returns to scale production
Section III.B, Figure 2 Panel B
Optimal policy steady state with alpha=0.75 (benchmark)