We assess the effects of financial shocks on inflation, and to what extent financial shocks can account for the … shocks through sign restrictions. Our main finding is that expansionary financial shocks temporarily lower inflation. This … during the latest financial crisis. We then explore the transmission channels of financial shocks relevant for inflation, and …

dynamics of inflation implied by macroeconomic data, the model needs to assume an average duration of price contracts which is …

bank can stabilize all variables at the cost of higher inflation and that macroeconomic volatility is smallest if the …

margin at the expense of hiring, which makes hours too volatile. The Ramsey planner uses inflation as a instrument to dampen …

inflation and output. In normal times, factor costs dominate firms’ marginal costs and hence inflation; credit spreads and the … stick shape. This mechanism also weakens the effects of forward guidance on inflation, since such policy reduces spreads and …

inflation. Furthermore, home bias in households' preferences allows for real exchange rate fluctuation, giving rise to …

inflation responses and a breakdown of divinecoincidence. The central bank's contemporaneous trade-off between output gap … andinflation stabilization is aggravated. Optimal monetary policy is strongly forward-looking and geared towards inflation …