The paper addresses the question what effects the enlargement of a monetary union will have on necessary structural reforms in the (low distortion) member countries and the (high distortion) candidate country. While monetary union lowers reforms in the candidate country, members of the monetary...

We estimate forward-looking interest-rate reaction functions for the G3 economies and for a group of countries which recently adopted inflation targets. Some significant shifts in the conduct of monetary policy are detected in the G3 countries, especially in the USA and Japan. In contrast with...

The combination of discretionary montetary policy, labor-market distortions and nominal wage rigidity yields an inflation bias as monetary policy tries to exploit nominal wage contracts to address labor-market distortions. Although an inflation target eliminates this inflation bias, it creates a...

In most European countries, money wages are given in collective agreements or individual employment contracts, and the employer cannot unilaterally cut wages, even after the expiration of a collective agreement. Ceteris paribus, workers have a stronger bargaining position when they try to...

Most macroeconomic models treat the central bank and the treasury as a unified entity. The balance sheet of the central bank is therefore implicitly treated as an accounting fiction. While this is often realistic, the central bank balance sheet today, with the US and ESCB balance sheets nearly...

This paper presents a business cycle analysis of monetary policy shocksmeasured by disturbances to open market operations, i.e. the ratio of open market papers to non-borrowed reserves. We find empirical evidence for the usefulness of this policy measure, as it predicts significant declines in...

What political objective should a common central bank in a heterogeneous monetary union pursue? Should it base its decisions on the EU-wide average of inflation and growth or should it instead focus on (appropriately weighted) national rates of inflation and growth? We find that a central bank...

This paper studies the design, effects and interactions of monetary and fiscal policies in the euro-area and between the euro-area and the non euro-area. To do so, a stylized three-country model of monetary and fiscal policy rules is constructed. It is analyzed how monetary and fiscal rules...

This paper addresses the question what effects the enlargement of a monetary union will have on necessary structural reforms in the (low distortion) member countries and the (high distortion) candidate countries. While monetary union lowers reforms in the candidate countries, members of the...

We evaluate the policy of flexible inflation targeting implemented by the Norges Bank since March 2001. We discuss the reasons why the real interest rates are significantly higher in Norway than in the rest of Europe. Finally we propose some institutional changes that can improve the policy...