How should monetary policy respond to changes in the relative price of oil? Considering supply and demand shock

  • Michael Plante
  • Published 2015

Abstract

This paper examines optimal monetary policy in a New Keynesian model where supply and demand shocks affect the price of oil. Optimal policy fully stabilizes core inflation when wages are flexible. The nominal rate rises (falls) in response to the demand (supply) shock. With sticky wages core inflation falls (rises) in response to the demand (supply) shock… (More)

Topics

Figures and Tables

Sorry, we couldn't extract any figures or tables for this paper.

Slides referencing similar topics