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 address this, it is optimal to focus on stabilizing prices of goods that are less flexible. Based on U.S. data, the researchers found that a slight decrease in prices (deflation) is best, even without demand for money. This is because prices of services have been increasing, and their prices are less likely to change.