DP3210 | New Perspectives on Monetary Policy, Inflation and the Business Cycle

Author(s)

Publication Date

20/02/2002

JEL Code(s)

Keyword(s)

Programme Area(s)

Network(s)

Abstract

The present Paper provides an overview of recent developments in the analysis of monetary policy in the presence of nominal rigidities. The Paper emphasizes the existence of several dimensions in which the recent literature provides a new perspective on the linkages among monetary policy, inflation, and the business cycle. It is argued that the adoption of an explicitly optimizing, general equilibrium framework has not been superfluous; on the contrary, it has yielded many insights which, by their nature, could hardly have been obtained with earlier non-optimizing models.