Optimal Inflation Target in an Economy with Menu Costs and an Occasionally Binding Zero Lower Bound
New York University
Menu cost model with fat-tailed idiosyncratic productivity shocks, GHH preferences, Epstein-Zin recursive utility, complementarities in production (materials and labor), Taylor rule with occasionally binding zero lower bound, and multiple aggre
intermediate firms: monopolistic competition with menu costs and idiosyncratic productivity shocks; final firms: perfect competition with Dixit-Stiglitz aggregator
Figure 8 p.19
Optimal inflation target in menu cost model without ZLB constraint