This paper documents producer price setting in 6 countries of the euro area: Germany, France, Italy, Spain, Belgium and Portugal. It collects evidence from available studies on each of those countries and also provides new evidence. These studies use monthly producer price data. The following...

In this paper, we provide determinacy conditions, i.e. conditions ensuring the existence and uniqueness of a bounded solution, in a purely forward-looking linear Markov switching rational expectations model. We thus settle the debate between Davig and Leeper (2007) and Farmer et al. (2010). The...

A number of recent papers point to the importance of distinguishing between the price reaction to micro and macro shocks in order to reconcile the volatility of individual prices with the observed persistence of aggregate inflation. We emphasize instead the importance of distinguishing between...

We study how changes in the value of the steady-state real interest rate affect the optimal inflation target, both in the U.S. and the euro area, using an estimated New Keynesian DSGE model that incorporates the zero (or effective) lower bound on the nominal interest rate. We find that this...

A number of central banks in advanced countries use ranges, or bands, around their inflationtarget to formulate their monetary policy strategy. The adoption of such ranges has beenproposed by some policymakers in the context of the Fed and the ECB reviews of theirstrategies. Using a standard New...

We address this question using an estimated New Keynesian DSGE model of the Euro Areawith trend inflation, imperfect indexation, and a lower bound on the nominal interest rate. Inthis setup, a decrease in the steady-state real interest rate, r*, increases the probability ofhitting the lower...

Recent studies emphasize that survey-based inflation risk measures are informative about future inflation and thus useful for monetary authorities. However, these data are typically available at a quarterly frequency whereas monetary policy decisions require a more frequent monitoring of such...

We provide evidence that households discretize their inflation expectations so that what matters for durable consumption decisions is the broad inflation regime they expect. Using survey data, we document that a large share of the adjustment in the average inflation expectation comes from the...

We show how monetary aggregates can be usefully incorporated in forecasts of inflation. This requires fully disregarding the high-frequency fluctuations blurring the money/inflation relation, i.e., the projection of inflation onto monetary aggregates must be restricted to the low frequencies....

Using several millions of daily prices collected over the period 2007-2018 in France, we investigate how gasoline retail prices respond to a common shock on marginal cost (i.e. the wholesale gasoline price quoted on the Rotterdam market). We find that the pass-through is complete: a 1% change in...