In the identified VAR literature the role of the exchange rate in measuring monetary policy shocks has often been neglected. However, many open economies find it useful to target the exchange rate. In such a regime exchange rate innovations will better capture domestic monetary policy shocks....

On the basis of historical data aggregated over the period 1973 to 2000, we estimated four different equilibrium exchange rate models for the synthetic euro. Using the same data set, variable definitions and sample period offers the possibility to assess the uncertainty surrounding such...

This introductory essay briefly summarizes the eleven empirical studies of price setting and price adjustment that are included in this special issue. The studies, which use data from several European countries, were conducted as part of the European Central Bank's Inflation Persistence Network.

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 role of three likely factors in driving the steady deterioration of the US external balance: US technology developments, changes in the US government fiscal position and the Fed’s monetary policy. Estimating several Vector Autoregressions on US data over the period...