We study environments with sticky prices, wages or portfolios where it is feasible and optimal to use monetary policy to replicate the allocation under full flexibility. In these environments the optimal policy does not depend on the scope of the frictions. In this sense, the strength of the...

We consider standard cash-in-advance monetary models and show that there are interest rate or money supply rules such that equilibria are unique. The existence of these single instrument rules depends on whether the economy has an infinite horizon or an arbitrarily large but finite horizon.

We consider a standard cash in advance monetary model with flexible prices or prices set in advance and show that there are interest rate or money supply rules such that equilibria are unique. The existence of these single instrument rules depends on whether the economy has an infinite horizon...

This paper develops a model of a small open economy integrated in a monetary union. The model incorporates the standard nominal and real frictions in the literature. The parameters of the model are calibrated to the Portuguese data and the effects of the standard monetary policy shock are studied.

Pricing discrepancies in the Iberian stock market are assessed. The estimation results suggest three conclusions. When considered individually each of the three stock markets considered, Frankfurt, Lisbon and Madrid Stock Exchanges, constitutes an almost perfectly integrated market. Even though...

Government expenditure shocks increase output and do not decrease consumption. We argue this is due to the behavior of the central bank. A basic RBC model is able to deliver this result as long as the central bank behaves as the empirical evidence suggests.

We derive principles of optimal short run monetary policy in a real business cycles model, with money and with monopolistic firms that set prices one period in advance. The only distortionary policy instruments are the nominal interest rates and the money supplies. In this environment it is...

This paper assesses the relevance of the exchange rate regime for stabilization policy. This regime question cannot be dealt with independently of other institutions, in particular how .fiscal policy is designed. We show that once .fiscal policy is taken into account, the exchange rate regime is...

This paper concerns entry mistakes when the incumbent practices strategic pricing. It is shown that an entry mistake may be a Pareto outcome. Due to an agency problem between the owner and the manager of the entrant firm there may be pooling sequential equilibria with too much entry that are...