Asymmetries in monetary policy
University of Bern; University of Lancaster
Standard New Keynesian model with Calvo pricing, monopolistic competition, and mark-up shocks; cubic approximation of welfare and quadratic approximation of model constraints for optimal policy analysis
intermediate firms: monopolistic competition with Calvo pricing; final firms: perfect competition with Dixit-Stiglitz aggregation
Section 4, Figure 1
Optimal policy response to positive mark-up shock under first-order (linear-quadratic) approximation