WP 2007-10: Oil Shocks and Optimal Monetary Policy
WP 2007-10: Oil Shocks and Optimal Monetary Policy
WP 2007-10: Oil Shocks and Optimal Monetary Policy
N°
WP 2007-10
Title
Oil Shocks and Optimal Monetary Policy
Author(s)
Carlos Montoro
Language
English
Date
2007-08.31
Abstract
This paper investigates how monetary policy should react to oil shocks in a microfounded model with staggered price-setting and oil as a non-produced input in the production function. We extend Benigno and Woodford (2005) to obtain a second order approximation to the expected utility of the representative household when the steady state is distorted and the economy is hit by oil price shocks.