Study finds slight deflation optimal for stabilizing consumption prices.
The study suggests that when prices of different goods change over time, monetary policy may not be able to stabilize all prices. To minimize distortions, it is best to focus on stabilizing prices of less flexible goods and services. Based on U.S. data, the optimal approach is to have slight deflation, even without demand for money. This is because prices of services have been increasing, and their prices are less likely to change.