On staggered prices and optimal inflation

On Endogenously Staggered Prices

Taylor's model of staggered contracts is an in uential explanation for nominal inertia and the persistent real e ects of nominal shocks. However, in standard imperfect competition models, if agents are allowed to choose the timing of pricing decisions, they will typically choose to synchronize. This paper provides a simple model of imperfect competition which produces stable staggering. Our arg...

Import Prices and Inflation

Understanding the consequences of international developments for domestic inflation is an extremely important question for central banks. But before we claim to have measured the extent of import price pass-through, it is necessary to be clear on exactly what such a number is intended to mean. One can attempt to come up with an answer on the basis of either economic theory or empirical evidence...

Inflation and health care prices.

On Optimal Scarcity Prices

This article contributes to the debate of missing money (e.g. Joskow(2007)) which has seriously questioned the desirability of caps on scarcity prices in markets with fluctuating demand by emphasizing their potentially negative impact on firms investment decisions in the long run. A prominent example are recently liberalized electricity markets, where competition authorities have imposed caps i...

The Impact of Inflation on ROE, Growth and Stock Prices

Using the constant growth dividend discount model (DDM), it can be shown that the critical factor which determines whether common stocks will be able to be an inflation hedge is the growth rate o f dividends. In turn, the growth of dividends is mainly impacted by the aggregate return on equity (ROE). Using the DuPont formula, it is clear that the main variable that drives the aggregate ROE in a...