| Record ID | marc_loc_2016/BooksAll.2016.part38.utf8:107983305:2532 |
| Source | Library of Congress |
| Download Link | /show-records/marc_loc_2016/BooksAll.2016.part38.utf8:107983305:2532?format=raw |
LEADER: 02532cam a22002897a 4500
001 2010656282
003 DLC
005 20100929090112.0
007 cr |||||||||||
008 100928s2010 mau sb 000 0 eng
010 $a 2010656282
040 $aDLC$cDLC
050 00 $aHB1
100 1 $aAnand, Rahul.
245 10 $aOptimal price indices for targeting inflation under incomplete markets$h[electronic resource] /$cRahul Anand, Eswar S. Prasad.
260 $aCambridge, MA :$bNational Bureau of Economic Research,$cc2010.
490 1 $aNBER working paper series ;$vworking paper 16290
538 $aSystem requirements: Adobe Acrobat Reader.
538 $aMode of access: World Wide Web.
500 $aTitle from PDF file as viewed on 9/28/2010.
530 $aAlso available in print.
504 $aIncludes bibliographical references.
520 3 $a"In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. In this paper, we develop a two-sector two-good closed economy new Keynesian model to study the optimal choice of price index in markets with financial frictions. Financial frictions that limit credit-constrained consumers' access to financial markets make demand insensitive to interest rate fluctuations. The demand of credit-constrained consumers is determined by their real wage, which depends on prices in the flexible price sector. Thus, prices in the flexible price sector influence aggregate demand and, for monetary policy to have its desired effect, the central bank has to stabilize price movements in the flexible price sector. Also, in the presence of financial frictions, stabilizing core inflation is no longer equivalent to stabilizing output fluctuations. Our analysis suggests that in the presence of financial frictions a welfare-maximizing central bank should adopt flexible headline inflation targeting-a target based on headline rather than core inflation, and with some weight on the output gap. We discuss why these results are particularly relevant for emerging markets, where the share of food expenditures in total consumption expenditures is high and a large proportion of consumers are credit-constrained"--National Bureau of Economic Research web site.
700 1 $aPrasad, Eswar.
710 2 $aNational Bureau of Economic Research.
830 0 $aWorking paper series (National Bureau of Economic Research : Online) ;$vworking paper no. 16290.
856 40 $uhttp://www.nber.org/papers/w16290