TY  - UNPD
A1  - Adam, Klaus
A1  - Weber, Henning
T1  - Optimal trend inflation
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 579
N2  - We present a sticky-price model incorporating heterogeneous Firms and systematic firm-level productivity trends. Aggregating the model in closed form, we show that it delivers radically different predictions for the optimal inflation rate than canonical sticky price models featuring homogenous Firms: 
(1) the optimal steady-state inflation rate generically differs from zero and, 
(2) inflation optimally responds to productivity disturbances.
Using micro data from the US Census Bureau to estimate the inflation-relevant productivity trends at the firm level, we find that the optimal US inflation rate is positive. It was slightly above 2 percent in the year 1986, but continuously declined thereafter, reaching about 1 percent in the year 2013.
T3  - CFS working paper series - 579 
KW  - optimal inflation rate
KW  - sticky prices
KW  - firm heterogeneity
Y1  - 2017
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/43865
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-438653
UR  - https://ssrn.com/abstract=3043109
IS  - July 12, 2017
PB  - Center for Financial Studies
CY  - Frankfurt, M.
ER  -