Optimal fiscal and monetary policy under sticky prices
Rutgers University, CEPR, and NBER; University of Pennsylvania and NBER
Stochastic production economy with monopolistically competitive intermediate goods producers, Rotemberg quadratic price adjustment costs, money-in-utility via transaction costs, distortionary income taxes, and nominal non-state-contingent gover
intermediate firms: monopolistic competition with differentiated goods, Rotemberg price adjustment costs; final firms: Dixit-Stiglitz aggregator, perfect competition
Table 2 p.14
Flexible prices and imperfect competition (y=0, Z=-6), deviation from Friedman rule due to monopoly profits