This paper develops and estimates a dynamic stochastic general equilibrium (DSGE) model with sticky prices and wages for the euro area. The model incorporates various other features such as habit formation, costs of adjustment in capital accumulation and variable capacity utilization. It is...

This paper evaluates new evidence on price-setting practices and inflation persistence in the euro area with respect to its implications for macro modeling. It argues that several of the most commonly used assumptions in micro-founded macro models are seriously challenged by the new findings....

This paper discusses the advantages of Bayesian New Neoclassical Synthesis models as tools for monetary policy analysis and forecasting. The combination of a sound, micro founded structure with a good probabilistic description of the observed data makes those models suitable for investigating...

We show that, when private sector expectations are determined in line with adaptive learning, optimal policy responds persistently to cost-push shocks. The optimal response is stronger and more persistent, the higher is the initial level of perceived inflation persistence by the private sector....

This paper investigates the macroeconomic relevance of new findings regarding nominal wage stickiness, wage indexation, wage staggering and synchronisation, and downward nominal and real wage rigidity in the euro area. Quantifying the relevance of this evidence for monetary policy remains to be...