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Price level targeting and stabilization policy

Berentsen, Aleksander and Waller, Christopher. (2011) Price level targeting and stabilization policy. Journal of money, credit and banking, Vol. 43. pp. 559-580.

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Official URL: http://edoc.unibas.ch/dok/A5840030

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Abstract

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.
Faculties and Departments:06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Professuren Wirtschaftswissenschaften > Wirtschaftstheorie (Berentsen)
UniBasel Contributors:Berentsen, Aleksander
Item Type:Article, refereed
Article Subtype:Research Article
Bibsysno:Link to catalogue
Publisher:Ohio State University Press
ISSN:0022-2879
Note:Publication type according to Uni Basel Research Database: Journal article
Last Modified:22 Nov 2018 15:01
Deposited On:14 Sep 2012 07:10

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