Skip to Main Content

Economic Quarterly

Fall 2001

A Primer on Optimal Monetary Policy with Staggered Price-Setting

Alexander L. Wolman

Three notions of optimal monetary policy are applied to a model in which firms set their prices for multiple periods. The best steady state inflation rate is slightly positive, but the policy that maximizes present discounted welfare leads in the long run to zero inflation. If commitment is not feasible, a benevolent monetary authority will choose relatively high inflation.

phone Contact Us

Lisa Kenney (804) 697-8179
Publications image

Email Updates

Sign up to receive a notification by email when a new issue of Economic Quarterly is posted online.