A quantitative analysis of cost-push shocks and optimal inflation volatility

Senay O., Sutherland A.

APPLIED ECONOMICS LETTERS, cilt.15, sa.10, ss.753-757, 2008 (SSCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 15 Sayı: 10
  • Basım Tarihi: 2008
  • Doi Numarası: 10.1080/13504850600770954
  • Dergi Adı: APPLIED ECONOMICS LETTERS
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus
  • Sayfa Sayıları: ss.753-757
  • Orta Doğu Teknik Üniversitesi Adresli: Evet

Özet

This article presents a quantitative analysis of optimal inflation volatility in a simple sticky-price general equilibrium model subject to both supply and cost-push shocks. It is found that optimal policy implies a relatively small degree of inflation volatility even when cost-push shocks are the dominant source of economic disturbance. In addition, it is found that optimal policy generates only a very small welfare gain when compared to strict inflation targeting.