This paper provides a summary of current knowledge on inflation persistence and price stickiness in the euro area, based on research findings that have been produced in the context of the Inflation Persistence Network. The main findings are: i) Under the current monetary policy regime, the...

This paper uses a small, calibrated forward-looking model of the euro-area economy to investigate the implications of incomplete information about potential output for the conduct and the design of monetary policy. Three sets of issues are examined. First, the certainty-equivalent optimal policy...

This paper analyses the effects of a change in monetary policy on firms' investment in Germany, France, Italy and Spain using a data set which provides aggregated balance sheet and profit and loss account data for 17 different industries and 3 different size classes. The main findings are...

This paper applies the identified VAR methodology to synthetic euro area data from 1980 till 1998 to study the macro-economic effects of an unexpected change in monetary policy in the euro area. The focus is on the area-wide monetary transmission. It is shown that the overall macro-economic...

The paper aims at deriving some stylised facts for financial, real, and monetary policy developments during asset price booms by means of aggregating information contained in 38 boom periods since the 1970s for 18 OECD countries. We observe 26 macroeconomic variables in a pre-boom, boom and...

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....

In the paper, we provide a critical and selective survey of arguments relevant for the assessment of the case for price level path stability (PLPS). Using a standard hybrid new Keynesian model we argue that price level stability provides a natural framework for monetary policy under commitment....

The paper aims at deriving some stylised facts for financial, real, and monetary policy developments during asset price booms by means of aggregating information contained in 38 boom periods since the 1970s for 18 OECD countries. We observe 26 macroeconomic variables in a pre-boom, boom and...

The work presented in this paper falls into two parts. First, using a simple model and within the context of the central bank’s objective of price stability, it is shown that the optimal monetary response to unexpected changes in asset prices depends on how these changes affect the central...

We consider optimal policy when private sector expectations are formed through adaptive learning. Earlier research has found that adaptive learning is consistent with empirical evidence on private sector expectations. In this paper, we consider the (admittedly) extreme case of sophisticated...