This paper summarises the results of a quantitative study of the possible impact of downward nominal wage rigidity on the determination of inflation and output in the euro area and the existence of a non-vertical long-run Phillips curve. The study was undertaken in the context of the review of...

The presence of a lower bound of zero on nominal interest rates has important implications for the conduct of optimal monetary policy. Standard rational expectations models can have alternative steady states as well as non-unique laws of motion, i.e. there can be possible sunspot equilibria....

This paper proposes a simple framework for analyzing a continuum of monetary policy rules characterized by differing degrees of credibility, in which commitment and discretion become special cases of what we call quasi commitment. The monetary policy authority is assumed to formulate optimal...

In this paper, we investigate the properties of alternative monetary policy rules using four structural macroeconometric models: the Fuhrer-Moore model, Taylor's Multi-Country Model, the MSR model of Orphanides and Wieland, and the FRB staff model. All four models incorporate the assumptions of...

This paper investigates the stabilization bias that arises in a model of monetary and fiscal policy stabilization of the economy, when assuming that the monetary authority put higher weight on inflation stabilization than society. We demonstrate that inflation-conservatism unambiguously leads to...

This paper assesses the implications for optimal discretionary monetary policy if the slope of the Phillips curve changes. The paper first derives a 'switching' Phillips curve from the optimal pricing decision of a monopolistic firm that faces a changing cost of price adjustment. Two states...

Sufficiently flexible labour markets are considered an important precondition for countries to benefit from membership in the monetary union. Economic policy coordination within the European Community is extensive and includes issues related to labour market structures. In this paper we study...

This paper aims at assessing the impact of inflation targeting on actual inflation when considering inflation perceptions together with interrelated inflation expectations, modifying the seminal papers of Barro and Gordon (1983a and 1983b). The modeling of inflation perceptions and of inflation...

First, we modify the Barro-Gordon model so that a credibility-stabilization tradeoff will remain, even when a performance contract of the type envisaged by Walsh (1995) is imposed on the central bank governor. We do this by modeling a real interest rate bias along with the inflation bias. Then,...

This study analyzes the effect of a money-financed policy for fiscal reform. We introduce a realistic setting in which real output is not given by an exogenous variable, but is determined by effective demand in a monetary growth model. Using this model, we compare the effects of the...