Optimal Monetary Policy with Informational Frictions
Revised version
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | en_US |
| Published: |
Cambridge, MA: Department of Economics, Massachusetts Institute of Technology
2011
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| Subjects: | |
| Online Access: | http://hdl.handle.net/1721.1/66950 |
| _version_ | 1826209558384607232 |
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| author | Angeletos, George-Marios La'O, Jennifer |
| author_facet | Angeletos, George-Marios La'O, Jennifer |
| author_sort | Angeletos, George-Marios |
| collection | MIT |
| description | Revised version |
| first_indexed | 2024-09-23T14:24:27Z |
| format | Working Paper |
| id | mit-1721.1/66950 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T14:24:27Z |
| publishDate | 2011 |
| publisher | Cambridge, MA: Department of Economics, Massachusetts Institute of Technology |
| record_format | dspace |
| spelling | mit-1721.1/669502019-04-10T15:31:21Z Optimal Monetary Policy with Informational Frictions Angeletos, George-Marios La'O, Jennifer business cycles dispersed information sticky information rational inattention optimal policy price stability Revised version We study optimal monetary policy in an environment in which firms’ pricing and production decisions are subject to informational frictions. Our framework accommodates multiple formalizations of these frictions, including dispersed private information, sticky information, and certain forms of inattention. An appropriate notion of constrained efficiency is analyzed alongside the Ramsey policy problem. Similar to the New-Keynesian paradigm, efficiency obtains with a subsidy that removes the monopoly distortion and a monetary policy that replicates flexible-price allocations. Nevertheless, “divine coincidence” breaks down and full price stability is no more optimal. Rather, the optimal policy is to “lean against the wind”, that is, to target a negative correlation between the price level and real economic activity. 2011-11-06T00:10:29Z 2011-11-06T00:10:29Z 2011-11-05 Working Paper http://hdl.handle.net/1721.1/66950 en_US Working Paper (Massachusetts Institute of Technology, Dept. of Economics);11-22 An error occurred on the license name. An error occurred getting the license - uri. application/pdf Cambridge, MA: Department of Economics, Massachusetts Institute of Technology |
| spellingShingle | business cycles dispersed information sticky information rational inattention optimal policy price stability Angeletos, George-Marios La'O, Jennifer Optimal Monetary Policy with Informational Frictions |
| title | Optimal Monetary Policy with Informational Frictions |
| title_full | Optimal Monetary Policy with Informational Frictions |
| title_fullStr | Optimal Monetary Policy with Informational Frictions |
| title_full_unstemmed | Optimal Monetary Policy with Informational Frictions |
| title_short | Optimal Monetary Policy with Informational Frictions |
| title_sort | optimal monetary policy with informational frictions |
| topic | business cycles dispersed information sticky information rational inattention optimal policy price stability |
| url | http://hdl.handle.net/1721.1/66950 |
| work_keys_str_mv | AT angeletosgeorgemarios optimalmonetarypolicywithinformationalfrictions AT laojennifer optimalmonetarypolicywithinformationalfrictions |