Durable Goods, Price Indexes, and Monetary Policy

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Title: Durable Goods, Price Indexes, and Monetary Policy
Author: Han, Kyoung Soo
Abstract: The dissertation studies the relationship among durable goods , price indexes and monetary policy in two sticky -price models with durable goods . One is a one -sector model with only durable goods and the other is a two -sector model with durable and non -durable goods . In the models with durable goods , the COLI (Cost of Living Index ) and the PPI (Producer Price Index ) identical to the CPI (Consumer Price Index ) measured by the acquisitions approach are distinguished , and the COLI /PPI ratio plays an important rule in monetary policy transmission . The welfare function based on the household utility can be represented by a quadratic function of the quasi -differenced durables -stock gaps and the PPI inflation rates . In the one -sector model , the optimal policy maximizing welfare is to keep the (acquisition ) price and the output gap at a constant rate which does not depend on the durability of consumption goods . In the two -sector model with sticky prices , the central bank has only one policy instrument , so it cannot cope with distortions in both sectors . Simulation results show that the PPI is an adequate price index for monetary policy and that a policy of targeting core inflation constructed by putting more weight on prices in the sector producing more durable goods is near optimal .
URI: http : / /hdl .handle .net /1969 .1 /ETD -TAMU -2930
Date: 2009-05-15

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Durable Goods, Price Indexes, and Monetary Policy. Available electronically from http : / /hdl .handle .net /1969 .1 /ETD -TAMU -2930 .

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