Inflation stabilization and welfare: the case of a distorted steady state
Gespeichert in:
| Beteiligte Personen: | , |
|---|---|
| Format: | Buch |
| Sprache: | Englisch |
| Veröffentlicht: |
Cambridge, Mass.
National Bureau of Economic Research
2004
|
| Schriftenreihe: | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series
10838 |
| Schlagwörter: | |
| Links: | http://papers.nber.org/papers/w10838.pdf |
| Abstract: | This paper considers the appropriate stabilization objectives for monetary policy in a microfounded model with staggered price-setting. Rotemberg and Woodford (1997) and Woodford (2002) have shown that under certain conditions, a local approximation to the expected utility of the representative household in a model of this kind is related inversely to the expected discounted value of a conventional quadratic loss function, in which each period's loss is a weighted average of squared deviations of inflation and an output gap measure from their optimal values (zero). However, those derivations rely on an assumption of the existence of an output or employment subsidy that offsets the distortion due to the market power of monopolistically-competitive price-setters, so that the steady state under a zero-inflation policy involves an efficient level of output. Here we show how to dispense with this unappealing assumption, so that a valid linear-quadratic approximation to the optimal policy problem is possible even when the steady state is distorted to an arbitrary extent (allowing for tax distortions as well as market power), and when, as a consequence, it is necessary to take account of the effects of stabilization policy on the average level of output. |
| Umfang: | 61 S. |
Internformat
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| 490 | 1 | |a National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |v 10838 | |
| 520 | 3 | |a This paper considers the appropriate stabilization objectives for monetary policy in a microfounded model with staggered price-setting. Rotemberg and Woodford (1997) and Woodford (2002) have shown that under certain conditions, a local approximation to the expected utility of the representative household in a model of this kind is related inversely to the expected discounted value of a conventional quadratic loss function, in which each period's loss is a weighted average of squared deviations of inflation and an output gap measure from their optimal values (zero). However, those derivations rely on an assumption of the existence of an output or employment subsidy that offsets the distortion due to the market power of monopolistically-competitive price-setters, so that the steady state under a zero-inflation policy involves an efficient level of output. Here we show how to dispense with this unappealing assumption, so that a valid linear-quadratic approximation to the optimal policy problem is possible even when the steady state is distorted to an arbitrary extent (allowing for tax distortions as well as market power), and when, as a consequence, it is necessary to take account of the effects of stabilization policy on the average level of output. | |
| 650 | 4 | |a Economic policy | |
| 650 | 4 | |a Economic stabilization | |
| 650 | 4 | |a Inflation (Finance) | |
| 650 | 4 | |a Welfare economics | |
| 650 | 4 | |a Inflationsbekämpfung / Geldpolitik / Mikroökonomische Fundierung / Wohlfahrtseffekt / Steady-State-Wachstum / Erwartungsnutzen / Theorie | |
| 650 | 4 | |a Wirtschaftspolitik | |
| 700 | 1 | |a Woodford, Michael |d 1955- |e Verfasser |0 (DE-588)128734388 |4 aut | |
| 776 | 0 | 8 | |i Erscheint auch als |n Online-Ausgabe |
| 830 | 0 | |a National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |v 10838 |w (DE-604)BV002801238 |9 10838 | |
| 856 | 4 | 1 | |u http://papers.nber.org/papers/w10838.pdf |z kostenfrei |3 Volltext |
| 943 | 1 | |a oai:aleph.bib-bvb.de:BVB01-012981499 | |
Datensatz im Suchindex
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| id | DE-604.BV019652897 |
| illustrated | Not Illustrated |
| indexdate | 2024-12-20T12:02:44Z |
| institution | BVB |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-012981499 |
| oclc_num | 254097317 |
| open_access_boolean | 1 |
| owner | DE-703 DE-521 DE-19 DE-BY-UBM |
| owner_facet | DE-703 DE-521 DE-19 DE-BY-UBM |
| physical | 61 S. |
| publishDate | 2004 |
| publishDateSearch | 2004 |
| publishDateSort | 2004 |
| publisher | National Bureau of Economic Research |
| record_format | marc |
| series | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| series2 | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| spelling | Benigno, Pierpaolo 1971- Verfasser (DE-588)124153380 aut Inflation stabilization and welfare the case of a distorted steady state Pierpaolo Benigno ; Michael Woodford Cambridge, Mass. National Bureau of Economic Research 2004 61 S. txt rdacontent n rdamedia nc rdacarrier National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 10838 This paper considers the appropriate stabilization objectives for monetary policy in a microfounded model with staggered price-setting. Rotemberg and Woodford (1997) and Woodford (2002) have shown that under certain conditions, a local approximation to the expected utility of the representative household in a model of this kind is related inversely to the expected discounted value of a conventional quadratic loss function, in which each period's loss is a weighted average of squared deviations of inflation and an output gap measure from their optimal values (zero). However, those derivations rely on an assumption of the existence of an output or employment subsidy that offsets the distortion due to the market power of monopolistically-competitive price-setters, so that the steady state under a zero-inflation policy involves an efficient level of output. Here we show how to dispense with this unappealing assumption, so that a valid linear-quadratic approximation to the optimal policy problem is possible even when the steady state is distorted to an arbitrary extent (allowing for tax distortions as well as market power), and when, as a consequence, it is necessary to take account of the effects of stabilization policy on the average level of output. Economic policy Economic stabilization Inflation (Finance) Welfare economics Inflationsbekämpfung / Geldpolitik / Mikroökonomische Fundierung / Wohlfahrtseffekt / Steady-State-Wachstum / Erwartungsnutzen / Theorie Wirtschaftspolitik Woodford, Michael 1955- Verfasser (DE-588)128734388 aut Erscheint auch als Online-Ausgabe National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 10838 (DE-604)BV002801238 10838 http://papers.nber.org/papers/w10838.pdf kostenfrei Volltext |
| spellingShingle | Benigno, Pierpaolo 1971- Woodford, Michael 1955- Inflation stabilization and welfare the case of a distorted steady state National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series Economic policy Economic stabilization Inflation (Finance) Welfare economics Inflationsbekämpfung / Geldpolitik / Mikroökonomische Fundierung / Wohlfahrtseffekt / Steady-State-Wachstum / Erwartungsnutzen / Theorie Wirtschaftspolitik |
| title | Inflation stabilization and welfare the case of a distorted steady state |
| title_auth | Inflation stabilization and welfare the case of a distorted steady state |
| title_exact_search | Inflation stabilization and welfare the case of a distorted steady state |
| title_full | Inflation stabilization and welfare the case of a distorted steady state Pierpaolo Benigno ; Michael Woodford |
| title_fullStr | Inflation stabilization and welfare the case of a distorted steady state Pierpaolo Benigno ; Michael Woodford |
| title_full_unstemmed | Inflation stabilization and welfare the case of a distorted steady state Pierpaolo Benigno ; Michael Woodford |
| title_short | Inflation stabilization and welfare |
| title_sort | inflation stabilization and welfare the case of a distorted steady state |
| title_sub | the case of a distorted steady state |
| topic | Economic policy Economic stabilization Inflation (Finance) Welfare economics Inflationsbekämpfung / Geldpolitik / Mikroökonomische Fundierung / Wohlfahrtseffekt / Steady-State-Wachstum / Erwartungsnutzen / Theorie Wirtschaftspolitik |
| topic_facet | Economic policy Economic stabilization Inflation (Finance) Welfare economics Inflationsbekämpfung / Geldpolitik / Mikroökonomische Fundierung / Wohlfahrtseffekt / Steady-State-Wachstum / Erwartungsnutzen / Theorie Wirtschaftspolitik |
| url | http://papers.nber.org/papers/w10838.pdf |
| volume_link | (DE-604)BV002801238 |
| work_keys_str_mv | AT benignopierpaolo inflationstabilizationandwelfarethecaseofadistortedsteadystate AT woodfordmichael inflationstabilizationandwelfarethecaseofadistortedsteadystate |