Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81926
Authors: 
Carlsson, Mikael
Westermark, Andreas
Year of Publication: 
2012
Series/Report no.: 
Sveriges Riksbank Working Paper Series 259
Abstract: 
In central theories of monetary non-neutrality the Ramsey optimal inflation rate varies between the negative of the real interest rate and zero. This paper explores how the interaction of nominal wage and search and matching frictions affect the policy prescription. We show that adding the combination of such frictions to the canonical monetary model can generate an optimal inflation rate that is significantly positive. Specifically, for a standard U.S. calibration, we find a Ramsey optimal inflation rate of 1.11 percent per year.
Subjects: 
Optimal Monetary Policy
Inflation
Labor-market Distortions
JEL: 
E52
H21
J60
Document Type: 
Working Paper

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