Published in:FRB of St. Louis Working Paper ; No. 2009-033B
Extent:
1 Online-Ressource (37 p)
Language:
English
DOI:
10.2139/ssrn.1444960
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments October 28, 2009 erstellt
Description:
We construct a dynamic stochastic general equilibrium model to study optimal monetary stabilization policy. Prices are fully flexible and money is essential for trade. Our 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 which effectively smooths consumption across states