The optimal inflation rate and firm-level productivity growth
Kiel Institute for the World Economy
New Keynesian sticky-price model augmented with firm-level productivity growth, heterogeneous firms by age, and exogenous firm entry and exit. Firms improve productivity over their lifetime, creating systematic movement through the productivity
monopolistic competition, Calvo pricing, firm-level productivity growth at rate g, heterogeneous productivity by firm age
Proposition 3 p.26
Two-sector model with calibrated parameters, labor income tax offsets static markup, beta=0.995
Authors present Proposition 3 as main quantitative result with calibrated parameters