The Optimal Inflation Target and the Natural Rate of Interest
Banque de France; CREI; Banque de France; Banque de France
Medium-scale New Keynesian DSGE model with Calvo staggered price and wage setting, imperfect indexation of prices and wages to past inflation and trend inflation, imperfect indexation of wages to productivity growth, habit formation in consumpt
intermediate firms: monopolistic competition with Calvo pricing; final firms: perfect competition with Dixit-Stiglitz aggregation
Section 3.1, Figures 1a, 2a
Optimal inflation target at posterior mean of parameters, US
Authors present this as the baseline optimal inflation target for the US at posterior mean parameters