TY - JOUR A1 - Snower, Dennis A1 - Graham, Liam T1 - Hyperbolic Discounting and Positive Optimal Inflation JF - Macroeconomic Dynamics N2 - The Friedman rule states that steady-state welfare is maximized when there is deflation at the real rate of interest. Recent work by Khan, King, and Wolman [Review of Economic Studies 10 (4), 825–860] uses a richer model but still finds deflation optimal. In an otherwise standard New Keynesian model we show that, if households have hyperbolic discounting, small positive rates of inflation can be optimal. In our baseline calibration, the optimal rate of inflation is 2.1% and remains positive across a wide range of calibrations. KW - Optimal Monetary Policy, Inflation Targeting, Phillips Curve, Nominal Inertia, Monetary Policy Y1 - 2013 U6 - https://doi.org/10.1017/S1365100511000393 VL - 17 IS - 3 SP - 591 EP - 620 ER -