3. Dezember 2024

Schumpeter BSoE Macro Seminar

Strike while the Iron is Hot: Optimal Monetary Policy with a Nonlinear Phillips Curve

Termin

3. Dezember 2024
16:00-18:00 c.t.

Ort

Elinor Ostrom Hall
DIW Berlin
Mohrenstr. 58
10117 Berlin

Sprecher*innen

Anton Nakov (European Central Bank)
The Schumpeter-BSoE-Seminar is the Berlin Macro and Economic History seminar. It is jointly organized by Michael Burda (HU Berlin), Britta Gehrke (FU Berlin), Frank Heinemann (TU Berlin), Alexander Kriwoluzky (DIW Berlin), Josefin Meyer (DIW) and Nikolaus Wolf (HU Berlin).

Speaker

Anton Nakov (European Central Bank)

Abstract:

We study the Ramsey optimal monetary policy within the Golosov and Lucas (2007) state-dependent pricing framework. The model provides micro-foundations for a nonlinear Phillips curve: the sensitivity of inflation to activity increases after large shocks due to an endogenous rise in the frequency of price changes, as observed during the recent inflation surge. In response to large cost-push shocks, optimal policy leverages the lower sacrifice ratio to reduce inflation and stabilize the frequency of price adjustments.
When facing total factor productivity shocks, an efficient disturbance, the optimal policy commits to strict price stability, similar to the prescription in the standard Calvo (1983) model.

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