with frequent changes in individual prices) differs from inflation for "sticky-price goods" (those displaying infrequent price changes). Compared to the predictions of popular sticky price models, actual inflation rates are far more volatile and transient, particularly for sticky-price goods.

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This paper considers the role of state-contingent inflation as a fiscal shock absorber in an economy with nominal rigidities. I study the Ramsey equilibrium in a monetary model with distortionary taxation, nominal non-state-contingent debt, and sticky prices. With sticky prices, the Ramsey planner

of optimal inflation targeting in a new theoretical framework, which conciliates the interaction between the degree of price stickiness, and the degree of strategic complementarities in firms ’ price setting. We show that adopting a target for inflation, crucially depends on the sequential but complementary

thePresidentoftheSociety,ChrisPissarides. Wearehonored and grateful for his support of our ongoing work, sufficiently so that we are submiting the flagship paper in the project, rather than a spinoff or summary (for the record, this paper has never been submitted for publication elsewhere). A previous version was titled “Really,

In the U.S. and Europe, prices change somewhere between every six months and once a year. Yet nominal macro shocks seem to have real effects lasting well beyond a year. “Sticky information ” models, as posited by Sims (2003), Woodford (2003) and Mankiw and Reis (2002), can reconcile micro

discussion and critical comment. References in publications to International Finance Discussion Papers (other than an acknowledgment that the writer has had access to unpublished material) should be cleared with the author or authors. Recent IFDPs are available on the Web at www.federalreserve.gov/pubs/ifdp/.Sticky

This paper examines a model of dynamic price adjustment based on the assumption that information disseminates slowly throughout the population. Compared with the commonly used sticky-price model, this sticky-information model displays three related properties that are more consistent with accepted

The New Keynesian Model (NKMl, in its various versions, is the most commonly used instrument for monetary policy analysis. The reason of its success Bes in the mix of assumptions used in building the model. On the one hand, the NKM combines elements of dynamic

I offer a macroeconomic view of product markets that combines the desirable properties of the market-clearing models descended from the real business cycle model, on the one hand, and the sticky-price disequilibrium model of modern inflation analysis, on the other hand. I adhere strictly