In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating … stabilize price movements in the flexible price sector. Also, in the presence of financial frictions, stabilizing core inflation … frictions a welfare-maximizing central bank should adopt flexible headline inflation targeting a target based on headline rather …

and real wage rigidities. In our analysis, we focus on the differentials in inflation and unemployment between countries … inflation and unemployment differentials. Second, we find that asymmetries in labor market structures tend to increase the … volatility of both inflation and unemployment differentials. Finally, we show that it is important to take into account the …

skilled workers being more complementary to capital than substitutable unskilled workers are (CSC channel). Strict inflation … introduce a trade-off between stabilizing inflation and aggregate demand …

state contingent inflation taxes/subsidies to smooth those rents. Hence, in the optimal Ramsey plan, inflation deviates from … zero and the optimal volatility of inflation is an increasing function of firing costs. The optimal rule should react to … employment alongside inflation …

inflation targeting, exchange rate management benefits households in the tradable goods sector but in the long run these …

period. The workers' bargaining power in the hours negotiation affects both unemployment volatility and inflation persistence … cost determination. This set-up produces realistic labor market statistics together with inflation persistence …

Real wages are a key determinant of marginal costs. The latter themselves are a driving force of inflation. We ask how … wages and labor market shocks feed into the inflation process. We model search and matching frictions in the labour market …

money growth leads to higher inflation and higher unemployment, so the long-run Phillips curve is not vertical. The optimal …