This revised second edition of Monetary Policy, Inflation, and the Business Cycle provides a rigorous graduate … for the analysis of monetary policy and its implications for inflation, economic fluctuations, and welfare. A backbone of … inflation-targeting policies. New material includes labor and financial market frictions, the zero lower bound on nominal …

setting by firms. We derive the relation between inflation and unemployment and discuss how it is influenced by the presence … of real wage rigidities. We show the nature of the tradeoff between inflation and unemployment stabilization, and we draw …

inflation and aggregate output. Our main findings are threefold. First, monetary policy affects the probability of a crisis both … central bank can both reduce the probability of a crisis and increase welfare by departing from strict inflation targeting and …

inflation and output. Our main findings are threefold. First, monetary policy affects the probability of a crisis both in the … reduce the probability of a crisis and increase welfare by departing from strict inflation targeting and responding …