Browsing by Subject "D01"

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  • Benchimol, Jonathan; Bounader, Lahcen (2018)
    Bank of Finland Research Discussion Papers 9/2018
    Optimal monetary policy under discretion, commitment, and optimal simple rules regimes is analyzed through a behavioral New Keynesian model. Flexible price level targeting dominates under discretion; flexible inflation targeting dominates under commitment; and strict price level targeting dominates when using optimal simple rules. The optimality of a particular regime is found to be independent of bounded rationality and only regime 's stabilizing properties condition its hierarchy. For every targeting regime, the policymaker 's knowledge of agents' myopia is decisive in terms of policy reactions. Welfare evaluation of different targeting regimes reveals that bounded rationality is not necessarily associated with decreased welfare. Several forms of economic inattention can increase welfare.
  • Aalto-Setälä, Ville; Schindler, Robert M. (2006)
    Bank of Finland Research Discussion Papers 30/2006
    Nominal rigidities have an important role in macro models used for the analysis of monetary policy.Recently, attractive prices (also known as price points) have often been referred to as one important potential explanation of nominal rigidities.An increased interest on attractive prices as an explanation for price rigidities rests on online pricing, in the context of which it has been shown that prices are rigid also on the internet, where physical costs are not important.Our empirical analyses using micro data on consumer prices in Finland indicate that a specific form of attractive prices 9-ending prices have a considerable effect on pricing dynamics.The results of the study show that changes to prices with 9 endings are more often decreases than are changes to prices with other endings.Price changes to 9-ending prices are also of smaller size than are changes to other endings. Key words: rigidity, price endings, attractive prices, 9-prices JEL classification numbers: E42, D01