Inventories and Optimal Monetary Policy
Federal Reserve Bank of Richmond; National Taiwan University
New Keynesian DSGE model augmented with inventories that facilitate sales following Bils and Kahn (2000), where inventory stock enters the Dixit-Stiglitz aggregator and affects firm demand
monopolistic competition with quadratic price adjustment costs, inventories facilitate sales
Table 2 Panel B p.14
Ramsey optimal policy with inventories, steady state gross inflation π = 1.0086 quarterly
Authors describe Ramsey policy with inventories as their main contribution and benchmark; steady state inflation calibrated to average post-war US quarterly inflation