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 …

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 …

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 …

In closed or open economy models with complete markets, targeting core inflation enables monetary policy to maximize … is high. We develop an open economy model with incomplete financial markets to show that headline inflation targeting … headline inflation, assigns zero weight to import prices …

Competitiveness differentials are blamed for the instability of the Eurozone. Most of the analyses focus on labour …

sensitivity of import prices has not fallen since 1999. We also point out a significant role played by the inflation in the … Eurozone, as the responsiveness of import prices to exchange rate fluctuations tends to decline in a low and more stable … inflation environment. Overall, our findings support the view that the extent of pass-through is comprised of both macro- and …