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Price smoothing policies: a welfare analysis

Canova, Fabio (1992) Price smoothing policies: a welfare analysis Journal of Monetary Economics, 30, (2), pp. 255-275.

Record type: Article


In post-WWII experience U.S. monetary authorities have attempted to eliminate seasonal fluctuations in prices and nominal interest rates. Developments in financial markets and recently discovered empirical regularities regarding the seasonal cycle seem to make these activities questionable. Using a money-in-the-utility-function model this paper analyzes the welfare properties of price and interest rate smoothing policies and the sense in which the distinction between seasonal and cyclical fluctuations is relevant. It is shown that smoothing policies are welfare improving, but not optimal, and that the origin of the shocks, not the persistence of the fluctuations, is relevant in formulating policies.

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Published date: November 1992


Local EPrints ID: 32940
ISSN: 0304-3932
PURE UUID: f01cded8-c6f8-4033-acfb-ae271213ecd5

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Date deposited: 11 Dec 2007
Last modified: 20 Oct 2017 10:18

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Author: Fabio Canova

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