Global excess liquidity is sometimes believed to limit sovereign monetary policy even in large economies, including the euro area. There is much discussion about what constitutes global excess liquidity and our approach adjusts liquidity for longer-term interest rate and output effects. We find...

Sticky price models featuring heterogeneous firms and systematic firm-level productivity trends deliver radically different predictions for the optimal inflation rate than their popular homogenous-firm counterparts: (i) the optimal steady-state inflation rate generically differs from zero and...

We present a sticky-price model incorporating heterogeneous firms and systematic firm-level productivity trends. Aggregating the model in closed form, we show that it delivers radically different predictions for the optimal inflation rate than canonical sticky price models featuring homogenous...

Sticky price models featuring heterogeneous firms and systematic firm-level productivity trends deliver radically different predictions for the optimal inflation rate than their popular homogenous-firm counterparts: (1) the optimal steady-state inflation rate generically differs from zero and...

This paper discusses the normative implications of the micro evidence on heterogeneity in price setting gathered by the Price-setting Microdata Analysis Network (PRISMA) for the level of inflation that central banks should target. The micro price data underlying the consumer price index are used...

We empirically identify the effect of inflation on relative price distortions, using a novel identification approach derived from sticky price theories with time or state-dependent adjustment frictions. Our approach can be directly applied to micro price data, does not rely on estimating the gap...