ABSTRACT. Reddy says that a factor that complicates the transmission mechanism of monetary policy is the limited size of the Indian financial system. Barseghyan and DiCecio analyze optimal discretionary monetary policy in an endogenous sticky prices model: sticky-price firms are allowed to switch to flexible pricing by paying a random cost. Gavin et al. point out that policymakers closely monitor long-term interest rates because they reflect expectations about future policy. Gilchrist et al. claim that firms, unlike investors, can exploit stock market bubbles by issuing new shares at inflated prices; this lowers the cost of capital and increases real investment.



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