Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/217146 
Year of Publication: 
2019
Citation: 
[Journal:] Quantitative Economics [ISSN:] 1759-7331 [Volume:] 10 [Issue:] 1 [Publisher:] The Econometric Society [Place:] New Haven, CT [Year:] 2019 [Pages:] 387-418
Publisher: 
The Econometric Society, New Haven, CT
Abstract: 
We study discretionary equilibrium in the Calvo pricing model for a monetary authority that chooses the money supply, producing three main contributions. First, price-adjusting firms have a unique equilibrium price for a broad range of parameterizations, in contrast to earlier results for the Taylor pricing model. Second, a generalized Euler equation makes transparent how the monetary authority affects future welfare through its influence on the future state of the economy. Third, we provide global solutions, including welfare analysis, for the transitional dynamics that occur if the monetary authority gains or loses the ability to commit.
Subjects: 
Time-consistent optimal monetary policy
discretion
Markov-perfect equilibrium
sticky prices
relative price distortion
JEL: 
E31
E52
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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