The European Central Bank has assigned a special role to money in its two pillar strategy and has received much criticism for this decision. In this paper, we explore possible justifications. The case against including money in the central bank's interest rate rule is based on a standard model...

We analyze the impact of shifts in the industrial composition of the economy on the distribution of the frequency of price change and its consequences for the slope of the Phillips curve for the United States. By combining product-level microdata on the frequency of price change with data on...

We propose a novel framework to gauge the credibility of central banks' commitment to an inflation-targeting regime. Our framework combines survey data on macroeconomic forecasts with high-frequency financial market data to understand how inflation targeting makes economic agents change their...

This paper discusses the likely evolution of U.S. inflation in the near and medium term on the basis of (1) past U.S. experience with very low levels of inflation, (2) the most recent Japanese experience with deflation, and (3) recent U.S. micro evidence on downward nominal wage rigidity. Our...

Refet Gürkaynak, Brian Sack, and Eric Swanson (2005) provide empirical evidence that long forward nominal rates are overly sensitive to monetary policy shocks, and that this is consistent with a model where long-term inflation expectations are not anchored because agents must infer the central...

This paper analyses the implications of cost-push shocks for the optimal choice of monetary policy target in an two-country sticky-price model. In addition to cost-push shocks, each country is subject to labour-supply and money-demand shocks. It is shown that the fully optimal coordinated policy...

The present paper uses survey data on expected consumer price developments to analyse the role of inflation expectations in the inflation process. The survey measures of price expectations are derived from the European Commission's Consumer Survey and from the surveys of professional experts...