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Relative Prices and Inflation Stabilisation

Author

Listed:
  • Kosuke Aoki

    (Faculty of Economics, University of Tokyo)

Abstract
When price adjustment is sluggish, inflation is costly in terms of welfare because it distorts various kinds of relative prices. Stabilising aggregate price inflation does not necessarily minimise these costs, but stabilising a well-designed core inflation minimises the cost of relative price fluctuations and thus the cost of inflation.

Suggested Citation

  • Kosuke Aoki, 2015. "Relative Prices and Inflation Stabilisation," UTokyo Price Project Working Paper Series 047, University of Tokyo, Graduate School of Economics.
    • Handle: RePEc:upd:utppwp:047
    as

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    File URL: http://www.price.e.u-tokyo.ac.jp/img/researchdata/pdf/p_wp065.pdf
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    References listed on IDEAS

    as
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    3. Robert King & Alexander L. Wolman, 1999. "What Should the Monetary Authority Do When Prices Are Sticky?," NBER Chapters, in: Monetary Policy Rules, pages 349-404, National Bureau of Economic Research, Inc.
    4. Julio J. Rotemberg & Michael Woodford, 1997. "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 297-361, National Bureau of Economic Research, Inc.
    5. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148, Elsevier.
    6. Mark Gertler & John Leahy, 2008. "A Phillips Curve with an Ss Foundation," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 533-572, June.
    7. Anton Nakov & Carlos Thomas, 2014. "Optimal Monetary Policy with State-Dependent Pricing," International Journal of Central Banking, International Journal of Central Banking, vol. 10(3), pages 49-94, September.
    8. Stefano Eusepi & Bart Hobijn & Andrea Tambalotti, 2011. "CONDI: A Cost-of-Nominal-Distortions Index," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(3), pages 53-91, July.
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    11. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Relative prices; inflation.;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

    NEP fields

    This paper has been announced in the following NEP Reports:

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