We document the presence of sizable distributional effects from unexpected price level movements in the Euro Area (EA) using sectoral accounts and newly available data from the Household Finance and Consumption Survey. The EA as a whole is a net winner of unexpected price level increases, with...

This Paper studies optimal nominal demand policy in a flexible price economy with monopolistic competition and inattentive firms (Shannon). Inattentiveness gives rise to idiosyncratic information errors and imperfect common knowledge about the shocks hitting the economy. Strategic...

We determine optimal discretionary monetary policy in a New Keynesian model when nominal interest rates are bounded below by zero. Nominal interest rates should be lowered faster in response to adverse shocks than in the case without bound. Such ‘pre-emptive easing’ is optimal because...

We compute the optimal non-linear interest rate policy under commitment for a forward-looking stochastic model with monopolistic competition and sticky prices when nominal interest rates are bounded below by zero. When the lower bound binds, the optimal policy is to reduce the real rate by...