On staggered prices and optimal inflation

This paper computes the steady-state optimal rate of inflation in a model with monopolistic competition under two different sticky-price specifications, Calvo (1983) and Taylor (1980).The optimal rate of inflation is positive and almost identical to the ratio between the rate of discount and the Dixit-Stiglitzelasticity.Asier Aguilera-Bravo gratefully acknowledges financial support from Fundación Banco Sabadell, Fundación Caja Navarra and Universidad Pública de Navarra. Miguel Casares would like to acknowledge financial support from the Spanish Ministerio de Ciencia, Innovación y Universidades (research project PGC2018-093542-B-100)