{"id":{"repo_id":"glasgow","oai_identifier":"oai:theses.gla.ac.uk:1399"},"canonical_url":"https://search.dev.ndltd.org/etd/glasgow/oai:theses.gla.ac.uk:1399","repository":{"repo_id":"glasgow","name":"University of Glasgow","base_url":"https://theses.gla.ac.uk/cgi/oai2"},"display":{"title":"Essays on optimal monetary policy under rule-of-thumb behaviour by price setters","abstract":"The aim of this thesis is to study the effects of inflation persistence due to rule-of-thumb behaviour by price setters on optimal monetary policy. We start with a canonical log-linearised New Keynesian model, which we extend by allowing a fraction of price setters to follow a rule-of-thumb when setting a new price. We consider different specifications for the rule-of-thumb. In all models, steady-state distortions are assumed to be small so to guarantee the feasibility of optimal monetary policy analysis within a linear-quadratic framework. We derive utility-based objective functions for the monetary authority and analyse a range of optimal commitment policies. We perform welfare analysis in order to rank the range of optimal commitment policies. We analytically derive the optimal steady-state inflation rates associated with each commitment policy. We show that rule-of-thumb behaviour by price setters generates an incentive for positive steady-state inflation. A type of timeless perspective commitment policy is also capable of delivering positive steady-state inflation, even in the absence of rule-of-thumb behaviour by price setters. The optimal steady-state inflation rates are directly proportional to the gap measuring the steady-state distortions and turn out to be small in magnitude. We depart from the assumption of small steady-state distortions and consider the case of a largely distorted steady state within a nonlinear medium-scale model, which adds both nominal rigidities and real rigidities to the basic New Keynesian model. We extend the model by allowing a fraction of price setters to follow a rule-of-thumb when posting a new price. We numerically characterise the optimal rate of inflation in the Ramsey steady state. We find that rule-of-thumb behaviour implies optimal positive inflation only in the absence of transactional frictions. We find that the gap reflecting steady-state distortions is only slightly larger than in the case of small steady-state distortions. Finally, we study Ramsey dynamics and the implementation of optimal monetary policy via simple interest-rate rules, which we expand to explore the importance of welfare-relevant output gaps.","abstract_html":"The aim of this thesis is to study the effects of inflation persistence due to rule-of-thumb behaviour by price setters on optimal monetary policy. We start with a canonical log-linearised New Keynesian model, which we extend by allowing a fraction of price setters to follow a rule-of-thumb when setting a new price. We consider different specifications for the rule-of-thumb. In all models, steady-state distortions are assumed to be small so to guarantee the feasibility of optimal monetary policy analysis within a linear-quadratic framework. We derive utility-based objective functions for the monetary authority and analyse a range of optimal commitment policies. We perform welfare analysis in order to rank the range of optimal commitment policies. We analytically derive the optimal steady-state inflation rates associated with each commitment policy. We show that rule-of-thumb behaviour by price setters generates an incentive for positive steady-state inflation. A type of timeless perspective commitment policy is also capable of delivering positive steady-state inflation, even in the absence of rule-of-thumb behaviour by price setters. The optimal steady-state inflation rates are directly proportional to the gap measuring the steady-state distortions and turn out to be small in magnitude. We depart from the assumption of small steady-state distortions and consider the case of a largely distorted steady state within a nonlinear medium-scale model, which adds both nominal rigidities and real rigidities to the basic New Keynesian model. We extend the model by allowing a fraction of price setters to follow a rule-of-thumb when posting a new price. We numerically characterise the optimal rate of inflation in the Ramsey steady state. We find that rule-of-thumb behaviour implies optimal positive inflation only in the absence of transactional frictions. We find that the gap reflecting steady-state distortions is only slightly larger than in the case of small steady-state distortions. Finally, we study Ramsey dynamics and the implementation of optimal monetary policy via simple interest-rate rules, which we expand to explore the importance of welfare-relevant output gaps.","abstract_has_math":false,"creators":["Pontiggia, Dario"],"institution":"University of Glasgow","degree_name":null,"degree_level":"PhD","degree_discipline":null,"degree_department":null,"school":null,"contributors":[],"advisors":[],"committee_chairs":[],"committee_members":[],"year":2009,"date_issued":"2009","date_published":"2009","updated_at":"2026-07-24T02:23:53Z","subjects":["HB Economic Theory"],"languages":["en"],"rights":[],"rights_urls":[],"identifier_entries":[]},"links":{"outbound_url":null,"outbound_label":null,"outbound_source":null},"metadata_groups":[{"id":"people","label":"People","entries":[{"key":"dc:creator","label":"Author","values":["Pontiggia, Dario"]}]},{"id":"academic_context","label":"Academic Context","entries":[{"key":"dc:date","label":"Dc Date","values":["2009"]},{"key":"dc:date.issued","label":"Date","values":["2009"]},{"key":"dc:publisher.institution","label":"Dc Publisher Institution","values":["University of Glasgow"]},{"key":"dc:relation.isreferencedby","label":"Dc Relation Isreferencedby","values":["https://theses.gla.ac.uk/1399/"]},{"key":"dc:relation.isreferencedby.uri","label":"Dc Relation Isreferencedby URI","values":["https://gla.on.worldcat.org/oclc/682903822"]},{"key":"dc:type","label":"Dc Type","values":["Thesis"]},{"key":"dc:type.qualificationlevel","label":"Dc Type Qualificationlevel","values":["PhD"]}]},{"id":"subjects_keywords","label":"Subjects and Keywords","entries":[{"key":"dc:subject","label":"Dc Subject","values":["HB Economic Theory"]}]},{"id":"language_rights","label":"Language and Rights","entries":[{"key":"dc:language","label":"Dc Language","values":["en"]}]},{"id":"identifiers","label":"Identifiers","entries":[{"key":"dc:identifier.uri","label":"Identifier URI","values":["https://theses.gla.ac.uk/1399/1/2009PontiggiaPhD.pdf"]}]},{"id":"additional","label":"Additional Metadata","entries":[{"key":"dc:description.abstract","label":"Abstract","values":["The aim of this thesis is to study the effects of inflation persistence due to rule-of-thumb behaviour by price setters on optimal monetary policy. We start with a canonical log-linearised New Keynesian model, which we extend by allowing a fraction of price setters to follow a rule-of-thumb when setting a new price. We consider different specifications for the rule-of-thumb. In all models, steady-state distortions are assumed to be small so to guarantee the feasibility of optimal monetary policy analysis within a linear-quadratic framework. We derive utility-based objective functions for the monetary authority and analyse a range of optimal commitment policies. We perform welfare analysis in order to rank the range of optimal commitment policies. We analytically derive the optimal steady-state inflation rates associated with each commitment policy. We show that rule-of-thumb behaviour by price setters generates an incentive for positive steady-state inflation. A type of timeless perspective commitment policy is also capable of delivering positive steady-state inflation, even in the absence of rule-of-thumb behaviour by price setters. The optimal steady-state inflation rates are directly proportional to the gap measuring the steady-state distortions and turn out to be small in magnitude. We depart from the assumption of small steady-state distortions and consider the case of a largely distorted steady state within a nonlinear medium-scale model, which adds both nominal rigidities and real rigidities to the basic New Keynesian model. We extend the model by allowing a fraction of price setters to follow a rule-of-thumb when posting a new price. We numerically characterise the optimal rate of inflation in the Ramsey steady state. We find that rule-of-thumb behaviour implies optimal positive inflation only in the absence of transactional frictions. We find that the gap reflecting steady-state distortions is only slightly larger than in the case of small steady-state distortions. Finally, we study Ramsey dynamics and the implementation of optimal monetary policy via simple interest-rate rules, which we expand to explore the importance of welfare-relevant output gaps."]},{"key":"dc:format","label":"Dc Format","values":["application/pdf"]},{"key":"dc:title","label":"Title","values":["Essays on optimal monetary policy under rule-of-thumb behaviour by price setters"]}]}],"canonical_facts":{"dc:creator":["Pontiggia, Dario"],"dc:date":["2009"],"dc:date.issued":["2009"],"dc:description.abstract":["The aim of this thesis is to study the effects of inflation persistence due to rule-of-thumb behaviour by price setters on optimal monetary policy. We start with a canonical log-linearised New Keynesian model, which we extend by allowing a fraction of price setters to follow a rule-of-thumb when setting a new price. We consider different specifications for the rule-of-thumb. In all models, steady-state distortions are assumed to be small so to guarantee the feasibility of optimal monetary policy analysis within a linear-quadratic framework. We derive utility-based objective functions for the monetary authority and analyse a range of optimal commitment policies. We perform welfare analysis in order to rank the range of optimal commitment policies. We analytically derive the optimal steady-state inflation rates associated with each commitment policy. We show that rule-of-thumb behaviour by price setters generates an incentive for positive steady-state inflation. A type of timeless perspective commitment policy is also capable of delivering positive steady-state inflation, even in the absence of rule-of-thumb behaviour by price setters. The optimal steady-state inflation rates are directly proportional to the gap measuring the steady-state distortions and turn out to be small in magnitude. We depart from the assumption of small steady-state distortions and consider the case of a largely distorted steady state within a nonlinear medium-scale model, which adds both nominal rigidities and real rigidities to the basic New Keynesian model. We extend the model by allowing a fraction of price setters to follow a rule-of-thumb when posting a new price. We numerically characterise the optimal rate of inflation in the Ramsey steady state. We find that rule-of-thumb behaviour implies optimal positive inflation only in the absence of transactional frictions. We find that the gap reflecting steady-state distortions is only slightly larger than in the case of small steady-state distortions. Finally, we study Ramsey dynamics and the implementation of optimal monetary policy via simple interest-rate rules, which we expand to explore the importance of welfare-relevant output gaps."],"dc:format":["application/pdf"],"dc:identifier.uri":["https://theses.gla.ac.uk/1399/1/2009PontiggiaPhD.pdf"],"dc:language":["en"],"dc:publisher.institution":["University of Glasgow"],"dc:relation.isreferencedby":["https://theses.gla.ac.uk/1399/"],"dc:relation.isreferencedby.uri":["https://gla.on.worldcat.org/oclc/682903822"],"dc:subject":["HB Economic Theory"],"dc:title":["Essays on optimal monetary policy under rule-of-thumb behaviour by price setters"],"dc:type":["Thesis"],"dc:type.qualificationlevel":["PhD"]},"updated_at":"2026-07-24T02:23:53Z"}