Data for: Optimal long-run inflation with occasionally binding financial constraints
| Main Author: | Abo-Zaid, Salem |
|---|---|
| Format: | Dataset |
| Terbitan: |
Mendeley
, 2016
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| Subjects: | |
| Online Access: |
https:/data.mendeley.com/datasets/tgbh4gbxt7 |
Daftar Isi:
- Abstract of associated article: This paper studies the optimal long-run inflation rate in a simple New Keynesian model with occasionally binding collateral constraints that intermediate-good firms face on hiring labor. The paper finds that the optimal long-run annual inflation rate is around 1.5% if the economy is hit by a total factor productivity (TFP) shock and nearly 2.5% if the economy is subject to a markup shock. The shadow value of the collateral constraint is akin to an endogenous cost-push shock. Differently from usual cost-push shocks, however, this shock is asymmetric as it takes non-negative values only. Since the mean of this asymmetric endogenous cost-push shock is positive, inflation is also positive on average. In addition, a binding collateral constraint resembles a time-varying tax on labor, which the monetary authority can smooth by setting a positive inflation rate. More generally, the basic result is related to standard Ramsey theory in that optimal policy smoothes distortions over time.