Monetary Policy Shake-Up: Optimal Inflation Tackles Monopolistic Profits
The study explores how monetary policy can influence prices and boost the economy when prices stay the same. By adding capital accumulation to the model, the researchers find that keeping prices stable is still the best strategy. The key is to control inflation by taxing monopolies, which helps lower prices and stimulate economic growth. This tactic works because investment levels and technological changes affect how much companies charge for their goods. So, by adjusting inflation rates, policymakers can encourage fair pricing and investment, leading to a healthier economy overall.