The optimal inflation rate under Schumpeterian growth

• 成果类型: Article
• 署名作者: Oikawa, Koki; Ueda, Kozo
• 署名单位: Waseda University; Waseda University
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2018.07.012
• 发表日期: 2018
• 页码: 114-125
• 关键词: Creative destruction; menu cost; New Keynesian; monetary policy

摘要

To analyze the relationship between inflation and economic growth, we construct an endogenous growth model with creative destruction, incorporating sticky prices due to menu costs. Price changes reduce the reward for innovation and thus lower the frequency of creative destruction. Central banks can maximize the growth rate by setting their inflation target at the negative of a fundamental growth rate. While the optimal inflation rate may be greater than the growth-maximizing inflation rate, our calibrated model shows that the optimal inflation rate is close to the growth-maximizing inflation rate and that a deviation from the optimal level has sizable impacts. (C) 2018 The Authors. Published by Elsevier B.V.