We argue that the New-Keynesian Phillips Curve literature has failed to deliver a convincing measure of “fundamental inflation”. We start from a careful modeling of optimal price setting allowing for non-unitary factor substitution, non-neutral technical change and timevarying factor...

We argue that the New-Keynesian Phillips Curve literature has failed to deliver a convincing measure of “fundamental inflation”. We start from a careful modeling of optimal price setting allowing for non-unitary factor substitution, non-neutral technical change and timevarying factor...

We compare real-time density forecasts for the euro area using three DSGE models. The benchmark is the Smets-Wouters model and its forecasts of real GDP growth and inflation are compared with those from two extensions. The first adds financial frictions and expands the observables to include a...

We compare real-time density forecasts for the euro area using three DSGE models. The benchmark is the Smets-Wouters model and its forecasts of real GDP growth and inflation are compared with those from two extensions. The first adds financial frictions and expands the observables to include a...

Equilibrium correction models of the price level are often used to model inflation. Such models assume that the long-run markup of prices over costs is fixed, but this may not be true for the Euro area economy, which has undergone major structural reforms over the last 25 years. We allow for...

This paper compares the welfare implications of two widely used pricing assumptions in the New-Keynesian literature: Calvo-pricing vs. Rotemberg-pricing. We show that despite the strong similarities between the two assumptions to a first order of approximation, in general they might entail...

We study empirically the macroeconomic effects of an explicit de jure quantitative goal for monetary policy. Quantitative goals take three forms: exchange rates, money growth rates, and inflation targets. We analyze the effects on inflation of both having a quantitative target, and of hitting a...

This paper tests whether the proposition that globalisation has led to greater sensitivity of domestic inflation to the global output gap (the “global output gap hypothesis”) holds for the euro area. The empirical analysis uses quarterly data over the period 1979-2003. Measures of the global...

JEL Classification: E52, O11, O41