Monetary Policy for Inattentive Economies

@inproceedings{Ball2003MonetaryPF,
  title={Monetary Policy for Inattentive Economies},
  author={Laurence Ball and Ricardo Reis},
  year={2003}
}
This paper is a contribution to the analysis of optimal monetary policy. It begins with a critical assessment of the existing literature, arguing that most work is based on implausible models of inflation-output dynamics. It then suggests that this problem may be solved with some recent behavioral models, which assume that price setters are slow to incorporate macroeconomic information into the prices they set. A specific such model is developed and used to derive optimal policy. In response to… CONTINUE READING
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