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Imperfectly credible disinflation under endogenous time-dependent pricing
The real effects of an imperfectly credible disinflation depend critically on the extent of price rigidity. Therefore, the study of how policymakers' credibility affects the outcome of an announced disinflation should include an analysis of the determinants of the frequency of price adjustments. In this paper, we examine how credibility affects the outcome of a disinflation in a model with endogenous time-dependent pricing rules. Both the initial degree of price rigidity, calculated optimally, and, more notably, changes in the duration of price spells during disinflation play an important ...
State-dependent pricing under infrequent information: a unified framework
We characterize optimal state-dependent pricing rules under various forms of infrequent information. In all models, infrequent price changes arise from the existence of a lump-sum "menu cost." We entertain various alternatives for the source and nature of infrequent information. In two benchmark cases with continuously available information, optimal pricing rules are purely state-dependent. In contrast, in all environments with infrequent information, optimal pricing rules are both time- and state-dependent, characterized by "trigger strategies" that depend on the time elapsed since ...