What determines the stochastic path of inflation? We study this question in a monetary economy featuring imperfect … information and rational expectations. The central bank follows an inflation targeting rule and communicates noisy information … about the future state of the economy to market participants through its public forecasts of inflation and output. Agents …

determinant of the monetary transmission mechanism, namely the degree of persistence characterising the inflation process. The … types of staggered contracts specifications which induce quite different degrees of inflation persistence. The paper shows … that inflation persistence is high when uncertainty about the prevailing degree of inflation persistence is pervasive …

The existence of nominal rigidities and inflation differentials between countries offers two of the main rationales for … an inflation buffer in a monetary union where monetary policy is oriented towards an area-wide inflation objective … strong argument for a positive inflation buffer to “grease the wheels” of the euro area economy – also in order to avoid the …