Inflation has fallen dramatically in countries like Spain and Italy over the last decade, but the rate of increase in "home good" prices remains stubbornly higher than the rate of increase in "traded good" prices. The paper begins by showing that this discrepancy can be explained (at least in...

This paper studies two aspects of the behaviour of provincial relative prices in Spain: the relevance and the nature of provincial inflation divergences and relative price shifts. Inflation differentials are found to be small (the range is less than half point per year in the long-run), but...

One of the most significant economic developments of recent years in industrialized countries has been the increasing orientation of macroeconomic policies - and of monetary policies in particular - to achieving lower inflation rates. This has led to a move from low inflation to price stability...

This paper identifies the basic features of the price setting mechanism in the Spanish economy, using a large dataset that contains over 1.1 million price records and covers around 70% of the expenditure on the CPI basket. In particular, the paper identifies differences in the frequency and size...

The purpose of this paper is to illustrate the implications for aggregate price dynamics of alternative characterizations of microeconomic price adjustment policies. Within the hazard adjustment framework developed in Caballero and Engel (1993a), we present alternative models of individual price...

This paper identifies the basic features of price setting behaviour at the producer level in the Spanish economy using a large dataset containing the micro data underlying the construction of the PPI over the period 1991 1999. The paper explores how these general features are affected by some...

This paper looks at the long term output effect of those monetary policies aimed at reducing inflation from its peak by late seventies, in nine major OECD countries. The estimated effect depends on the way nominal shocks are identified. Alternatively to the cross-country regression analysis we...

The liquidity effect, defined as a decrease in nominal interest rates in response to a monetary expansion, is a major stylized fact of the business cycle. This paper seeks to understand under what conditions such an effect can be explained in a general equilibrium model with sticky prices and...