SHARE   Share on Twitter Share on Facebook Email

Price-Level Targeting and Stabilization Policy

The authors construct a dynamic stochastic general equilibrium model to study optimal monetary stabilization policy. Prices are fully flexible and money is essential for trade. The authors’ main result is that if the central bank pursues a price-level target, it can control inflation expectations and improve welfare by stabilizing short-run shocks to the economy. The optimal policy involves smoothing nominal interest rates that effectively smooths consumption across states.

Read Full Text


Recently Viewed Series


Subscribe to our newsletter for updates on published research, data news, and latest econ information.
Name:   Email:  
Twitter logo Google Plus logo Facebook logo YouTube logo LinkedIn logo