This paper reports estimates of monetary policy reaction functions for two sets of countries: the G3 (Germany, Japan and the United States) and the E3 (France, Italy and the United Kingdom). It finds that since 1979 each of the G3 central banks has pursued an implicit form of inflation...

The present Paper provides an overview of recent developments in the analysis of monetary policy in the presence of nominal rigidities. The Paper emphasizes the existence of several dimensions in which the recent literature provides a new perspective on the linkages among monetary policy,...

The purpose of the present Paper is twofold. First, we characterize the Fed’s systematic response to technology shocks and its implications for US output, hours and inflation. Second we evaluate the extent to which those responses can be accounted for by a simple monetary policy rule...

Central banks' projections--i.e. forecasts conditional on a given interest rate path-- are often criticized on the grounds that their underlying policy assumptions are inconsistent with the existence of a unique equilibrium in many forward-looking models. Here I describe three alternative...

We study the gains from increased wage flexibility and their dependence on exchange rate policy, using a small open economy model with staggered price and wage setting. Two results stand out: (i) the impact of wage adjustments on employment is smaller the more the central bank seeks to stabilize...

We estimate the response of stock prices to exogenous monetary policy shocks using a vector-autoregressive model with time-varying parameters. Our evidence points to protracted episodes in which stock prices end up increasing persistently in response to an exogenous tightening of monetary...

I examine the impact of alternative monetary policy rules on a rational asset price bubble, through the lens of an overlapping generations model with nominal rigidities. A systematic increase in interest rates in response to a growing bubble is shown to enhance the fluctuations in the latter,...

I analyze the effects of an increase in government purchases financed entirely through seignorage, in both a classical and a New Keynesian framework, and compare them with those resulting from a more conventional debt-financed stimulus. My findings point to the importance of nominal rigidities...

We introduce rule-of-thumb consumers in an otherwise standard dynamic sticky price model, and show how their presence can change dramatically the properties of widely used interest rate rules. In particular, the existence of a unique equilibrium is no longer guaranteed by an interest rate rule...

We lay out a small open economy version of the Calvo sticky price model, and show how the equilibrium dynamics can be reduced to a tractable canonical system in domestic inflation and the output gap. We employ this framework to analyse the macroeconomic implications of three alternative monetary...