The bulk of literature on real rigidity attempts to identify sources of real rigidity in market imperfections while assuming that the money supply is exogenously set. This paper shows that monetary policy preferences affect the responsiveness of marginal cost to output and through this channel...

This paper argues that the adoption of an inflation target reduces the persistence of inflation.We develop the theoretical literature on inflation persistence by introducing a Taylor rule for monetary policy into a model of persistence and showing that inflation targets reduce inflation...

This paper argues that the adoption of an inflation target reduces the persistence of inflation.We develop the theoretical literature on inflation persistence by introducing a Taylor rule for monetary policy into a model of persistence and showing that inflation targets reduce inflation...

This paper argues that the parameters of monetary policy rules affect the persistence of inflation and output. Persistence is lower if monetary policy emphasises the price level or if there is an inflation target. A greater emphasis on output increases persistence. There is a simple New...

This paper argues that the parameters of monetary policy rules affect the persistence of inflation and output. Persistence is lower if monetary policy emphasises the price level or if there is an inflation target. A greater emphasis on output increases persistence. There is a simple New...

We use a simple model to show that there is a positive relationship between monetary policy preferences for output stability, real rigidity and macroeconomic persistence. This result has two non-trivial implications. First it suggests that output stabilization may be a less desirable policy...

This paper analyses a model of non-linear exchange rate adjustment that extends the literature by allowing asymmetric responses to over- and under-valuations. Applying the model to Greece and Turkey, we find that adjustment is asymmetric and that exchange rates depend on the sign as well as the...

This paper estimates a variety of models of inflation using quarterly data for the UK between 1965 and 2001. We find strong evidence that the persistence of inflation is nonlinear and that inflation adjusted more rapidly in periods of macroeconomic stress such as the mid-1970s, the early 1980s...