Labor-Market Frictions and Optimal Inflation∗
نویسندگان
چکیده
In main 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 wageand search and matching frictions affect the planners choice. We show that adding the combination of such frictions to the canonical monetary model can generate an optimal inflation that is significantly positive. Specifically, for a standard U.S. calibration, we find a Ramsey optimal inflation rate of 111 percent per year.
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