We show a simple way to introduce monopolistic competition in a general equilibrium model where prices are fully .exible, the velocity of money is variable and cash-in-advance (CIA) constraints occasionally bind.We establish the conditions under which money has real effects and demonstrate that...

We depart from the assumption of perfect competition in the final goods sector, commonly used in cash-in-advance (CIA) models, providing extensive theoretical analysis of the general equilibrium of an economy with imperfect competition, endogenous production and fully flexible prices in the...

We show a simple way to introduce monopolistic competition in a general equilibrium model where prices are fully flexible, the velocity of money is variable and cash-in-advance (CIA) constraints occasionally bind. We establish the conditions under which money has real effects and demonstrate...

Recent research has suggested that in deriving optimal policy under discretion, policymakers should react as if there were no structural inflation persistence in order to improve welfare. This paper considers whether such a strong result extends to an inflation targeting central bank with a more...

This paper examines the relationship between cyclical output and inflation in models commonly used for monetary policy analysis. This includes models that incorporate the New Keynesian, Fuhrer-Moore and backward-looking Phillips curves. The main finding is that these models imply a strong...

When indexation is endogenous price level targeting slightly adds to economic stability, contrary to widespread fears to the contrary. The aggregate supply curve flattens and the aggregate demand curve steepens, increasing stability in the face of supply shocks.

We use a time-varying parameter dynamic factor model with stochastic volatility (DFM-TV-SV) estimated using Bayesian methods to disentangle the relative importance of the common component in FHFA house price movements from state-specific shocks, over the quarterly period of 1975Q2 to 2017Q4. We...

In this paper, we examine the extent to which monetary policy should respond to movements in sectoral inflation rates. To do this we construct a Generalised Taylor model that takes specific account of the sectoral make-up of the consumer price index (CPI). We calibrate the model for each sector...

DSGE models based on New Keynesian principles, which have been extended to allow for banking, the zero lower bound on interest rates (ZLB), and varying price duration, can account well for recent macroeconomic behavior across a variety of economies. These models Önd that active Öscal policy...

The purpose of the present paper is to investigate perceived inflation gap persistence using actual data of professional forecasts. We derive the unobserved perceived inflation gap persistence and using a state dependent model we estimate the non-linear persistence coefficient of inflation gap....