In this paper we establish a link between the volatility of oil price shocks and a positive expected value of inflation in equilibrium (inflation premium). In doing so, we implement the perturbation method to solve up to second order a benchmark New Keynesian model with oil price shocks. In...

I reconcile macro- and micro-evidence on price setting in a search and matching framework. Search frictions lead price-setting firms to negotiate wage rates with their employees. In contrast to the existing macro-labor literature, I assume that wage-bargaining and price-setting occur in the same...

Wavelets are a useful analytical tool to study economic decisions on different times scales. Wavelets are particular types of function that are localized both in time and frequency domain and used to decompose a function f(x) (i.e. a signal, a surface, a series, etc..) into more elementary...

After the presentation of the Phillips curve as an empirical regularity (Phillips 1958 ) economists and policy makers alike have tried to exploit it for policy purposes. Even before the oil shocks in the seventies and early eighties this has had mixed success only. With the advent of...

This paper introduces a form of boundedly-rational expectations into an otherwise standard New Keynesian Phillips curve. The representative agent's forecast rule is optimal, conditional on a perceived law of motion for inflation and observed moments of the inflation time series. The perceived...

We connect two major strands of the recent monetary policy literature, i) the search for well microfounded optimising models consistent with macroeconomic data, especially persistence in inflation, and ii) the wealth of newly available microeconomic data on price changing behaviour from the...

We examine the long-run output-inflation trade-off under the assumption that firms face menu costs and set prices in a state dependent fashion. We argue that these characteristics capture the idea that the long-run output-inflation trade-off is driven by (predictable) trend inflation, and the...

The recent works of Gali and Gertler (1999) and Gali, Gertler, and Lopez-Salido (2001) provided evidence supporting the NKPC for the United States and the euro area. However, several econometric problems have been discussed in the literature on the empirical relevance of their results (among...