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http://hdl.handle.net/10419/28379
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| Title: | | Oligopolistic competition and optimal monetary policy  |
| Authors: | | Faia, Ester |
| Issue Date: | | 2009 |
| Series/Report no.: | | Kiel working paper 1552 |
| Abstract: | | The literature has shown that product market frictions and firms dynamic play a crucial role in reconciling standard DSGE with several stylized facts. This paper studies optimal monetary policy in a DSGE model with sticky prices and oligopolistic competition. In this model firms' monopolistic rents induce both intra-temporal and intertemporal time-varying wedges which induce inefficient fluctuations of employment and consumption. The monetary authority faces a trade-off between stabilizing inflation and reducing inefficient fluctuations, which is resolved by using consumer price inflation as a state contingent sale subsidy. An analysis of the welfare gains of alternative rules show that targeting mark-ups and asset prices might improve upon a strict inflation targeting. |
| Subjects: | | Product market frictions oligopolistic competition optimal monetary policy |
| JEL: | | E3 E5 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des IfW Kieler Arbeitspapiere, IfW
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