stronger bargaining position when they try to prevent a cut in money wages. If inflation is so low that some money wages have … to be cut, workers stronger bargaining position requires higher unemployment in equilibrium. However, inflation is more … stable when money wage rigidity binds, providing an incentive for monetary policy makers to choose a low target for inflation …

inflation, a finding that is at odds with the assumption of constant indexation parameters in most New-Keynesian DSGE models. We … response to aggregate shocks and monetary policy. We show that workers index wages to past inflation when output fluctuations … are primarily explained by technology and permanent inflation-target shocks, whereas they index to trend inflation when …

impact of trend inflation on price flexibility, and the relationship between announcement and implementation effects. This is … zero-inflation steady state. We show that a suitable calibration of the model has similar effects on macroeconomic … variables as standard versions of the menu cost model. It replicates the effect of trend inflation on the impulse response to …

relevant for pass-through: beliefs about the expected duration of the shock and its interaction with price rigidities. We then … employ a hypothetical vignette to study the causal effect of nominal and real rigidities as well as the nature of the shock …

model provides micro-foundations for a nonlinear Phillips curve: the sensitivity of inflation to activity increases after … large shocks due to an endogenous rise in the frequency of price changes, as observed during the recent inflation surge. In … response to large cost-push shocks, optimal policy leverages the lower sacrifice ratio to reduce inflation and stabilize the …

inflation bias as monetary policy tries to exploit nominal wage contracts to address labour-market distortions Although an … inflation target eliminates this inflation bias, it creates a conflict between monetary policy and discretionary fiscal policy …

the traditional results on the impact of inflation. In particular, recent findings suggest that quantity-adjustment costs … may remove the linkage between output and inflation. We show that this is not the case when inflation is anticipated. On …