Paper on the price level stability
This research paper from the Bank of Portugal provides an overview of the arguments for assessing the case for price level path stability (PLPS).
The authors use a standard hybrid new Keynesian model and say that price level stability provides "a natural framework for monetary policy under commitment". They describe the main arguments both in favour of and against a PLPS regime, and conclude, using the Smets and Wouters (2003) model, that price level is stationary under optimal policy under
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