In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. We develop a two-sector two-good new-Keynesian model to study the optimal choice of price index in markets with financial frictions. We find that,...

The paper uses the P-STAR model to analyze Spanish prices from 1970 to 1996, adding the foreign price gap to the standard domestic definition of the P-STAR model (the domestic price gap) to assess the role German price movements played in Spanish inflation. The domestic price gap turns out to be...

The paper uses a simple analytical framework to estimate relationships between prices, money the exchange rate, and interest rates in Albania during 1993–97. The estimated parsimonious error correction model extends the findings of a growing literature on inflation and money demand in...

The paper assesses inflation risks resulting from the convergence of structures of relative prices in Central and Eastern European (CEE) countries toward the European Union (EU). The basic idea of the paper is that under low downward flexibility of domestic nominal prices, the adjustment of...

This paper examines the influence of economic liberalization and monetary growth on inflation during the transition from central plan to market. It concludes that price decontrol had a substantial, one-time effect on the price level but no lasting effect on inflation; that economic...

Inflation persistence is sometimes defined as the tendency for price shocks to push the inflation rate away from its steady state—including an inflation target—for a prolonged period. Persistence is important because it affects the output costs of lowering inflation back to the target, often...

We offer a novel methodology for assessing the quality of inflation reports. In contrast to the existing literature, which mostly evaluates the formal quality of these reports, we evaluate their economic content by comparing inflation factors reported by the central banks with ex-post...

Indian food and fuel inflation has remained high for several years, and second-round effects on core inflation are estimated to be large. This paper estimates the size of second-round effects using an estimated reduced-form general equilibrium model of the Indian economy, which incorporates...

We study whether clarity of central bank inflation reports affects return volatility in financial markets. We measure clarity of reports by the Czech National Bank, the European Central Bank, the Bank of England, and Sveriges Riksbank using the Flesch-Kincaid grade level, a standard readability...

The ongoing demographic changes will bring about a substantial shift in the size and the age composition of the population, which will have significant impact on the global economy. Despite potentially grave consequences, demographic changes usually do not take center stage in many macroeconomic...