The Optimal Inflation Target and the Natural Rate of Interest
Banque de France; CREI; Banque de France; Banque de France
Medium-scale New Keynesian DSGE model with Calvo staggered price and wage setting, imperfect indexation of prices and wages to past inflation and trend inflation, imperfect indexation of wages to productivity growth, habit formation in consumpt
intermediate firms: monopolistic competition with Calvo pricing; final firms: perfect competition with Dixit-Stiglitz aggregation
Section 4.2, Figures 7b
Bayesian-theoretic optimal inflation after 100bp decline in r*, Euro Area