This paper estimates a dynamic stochastic general equilibrium (DSGE) model for the European Monetary Union by using Bayesian techniques. A salient feature of the model is an extension of the typically postulated quadratic cost structure for the monopolistic choice of price variables. As shown in...

We study alternative monetary policy strategies in the presence of the lower bound on nominal interest rates and a low equilibrium real rate using an estimated DSGE model for the euro area. We demonstrate that simple feedback rules that implement inflation targeting result in a binding lower...

This paper estimates and compares four versions of the sticky price New Keynesian model for the Euro area, using a Bayesian approach as described in Rabanal and Rubio-Ramírez (2003). The authors find that the average duration of price contracts is between four and eight quarters, similar to the...

It has been argued that existing DSGE models cannot properly account for the evolution of key macroeconomic variables during and following the recent Great Recession, and that models in which inflation depends on economic slack cannot explain the recent muted behavior of inflation, given the...

It has been argued that existing DSGE models cannot properly account for the evolution of key macroeconomic variables during and following the recent Great Recession, and that models in which inflation depends on economic slack cannot explain the recent muted behavior of inflation, given the...

The business cycle is alive and well, and real variables respond to it more or less as they always did. Witness the Great Recession. In ation, in contrast, has gone quiescent. This paper studies the sources of this disconnect using VARs and an estimated DSGE model. It finds that the disconnect...

This paper examines the consequences of (S, s) pricing rules in a dynamic economy with heterogeneous costs of price adjustment. We construct the stationary distributions for aggregate output and prices for our model economy. As a result of our assumption of heterogeneous costs we find that: (i)...

This paper examines the consequences of introducing firm specific capital into a selection of commonly used sticky price business cycle models. We find that modelling firm-specific capital markets greatly reduces the response of inflation to changes in average real marginal cost. Calibrated to...

We find that deep contractions have highly persistent scarring effects, depressing the level of GDP at least a decade hence. Drawing on a panel of 24 advanced and emerging economies from 1970 to the present, we show that these effects are nonlinear and asymmetric: there is no such persistence...

This paper studies the state-dependent effects of monetary policy shocks. It shows that a canonical sticky-price model with real rigidity in the form of firm-specific factors can generate substantial state-dependence in the effects of monetary policy shocks. Factor specificity introduces a...