Firm-Specific Capital and Welfare∗

What are the consequences for monetary policy design implied by the fact that price setting and investment typi-cally take place simultaneously at the firm level? To address this question we analyze simple (constrained) optimal interest rate rules in the context of a dynamic New Keynesian model featuring firm-specific capital accumulation as well as sticky prices and wages a ̀ la Calvo. We make the case for Taylor-type rules. They are remarkably robust in the sense that their welfare implications do appear to hinge neither on the spe-cific assumptions regarding capital accumulation that are used in their derivation nor on the particular definition of natural output that is used to construct the output gap