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 3 Panel B p.17
Optimized contemporaneous Taylor rule with inventories, smoothing ρ=1, ψ1=3, ψ2=0