This paper quantitatively evaluates a steady-state inflation rate that is considered desirable from the perspective of social welfare, using a model describing the Japanese economy. Specifically, it begins by setting out points concerning the costs and benefits that accompany inflation. We build...

This paper shows that nominal rigidities in terms of price stickiness acts as a powerful supply-shock filter that reduces the overall economic instability. Considering a range of admissable values for price stickiness, the volatility of inflation, output and interest rate induced by technology...

Since the '80s the volatility of output growth and inflation experienced by several industrialized countries has remarkably declined, what has been dubbed the "Great Moderation". Various explanations have been proposed and likely all play some role. This paper shows that when an industrial...

In a two-sector New-Keynesian model, this paper shows that the dispersion in the degree of sectoral price stickiness plays a key role in the determination of the dynamics of aggregate inflation and, consequently, of the whole economy. The dispersion in price stickiness reduces the persistence of...

This paper explores how a monetary regime change affects headline inflation via differential effects on various sectors in the economy. Using disaggregated CPI data for Canada, we find that the response to the adoption of inflation targeting (IT) was quite heterogeneous across sectors. While...

Since the ’80s the volatility of output growth and inflation experienced by several industrialized countries has remarkably declined, what has been dubbed the “Great Moderation”. Various explanations have been proposed and likely all play some role. This paper shows that when an industrial...

This paper employs stochastic simulations of the New Area-Wide Model - microfounded open-economy model developed at the ECB - to investigate the consequences of the zero lower bound on nominal interest rates for the evolution of risks to price stability in the euro area during the recent...

Under a conventional policy rule, a central bank adjusts its policy rate linearly according to the gap between inflation and its target, and the gap between output and its potential. Under the opportunistic approach to disinflation a central bank controls inflation aggressively when inflation is...