Optimal monetary policy boosts long-term growth without sacrificing stability.
The study looked at how monetary policy affects long-term economic growth in a model with sticky prices and wages. The researchers found that the best monetary policy rule is one where interest rates respond actively to prices and wages, but not as much to output growth. This rule maximizes overall economic growth. This suggests that while it's important to focus on long-term growth, stabilizing prices and wages is crucial for a healthy economy.