the special case in which prices are sticky and wages are perfectly flexible. When the model is calibrated to exhibit an …

If price levels are initially different across the euro area, convergence to a common level of prices would imply that … inflation will be higher in countries where prices are initially low. Price level convergence thus provides a potential … between 1990 and 1999 prices did become less dispersed in the euro area. Convergence is especially evident for traded goods …

-optimal equilibrium that would occur under completely flexible wages and prices; that is, the model exhibits a tradeoff between … stabilizing the output gap, price inflation, and wage inflation. The Pareto optimum is attainable only if either wages or prices …

aggregate price level and to demonstrate econometrically its equivalence to the exogeneity of relative prices with respect to … role for supply-side disturbances in explaining comovements in aggregate and relative prices. …