Understanding the determinants of individual price setting behaviour is crucial for the formulation of monetary policy, especially in an economy experiencing ongoing structural change. These behavioural mechanisms play a fundamental role in influencing the characteristics of aggregate inflation...

In the paper, we provide a critical and selective survey of arguments relevant for the assessment of the case for price level path stability (PLPS). Using a standard hybrid new Keynesian model we argue that price level stability provides a natural framework for monetary policy under commitment....