This paper compares sticky-price and sticky-information model under a more general staggering price-setting scheme. Different to Mankiw and Reis (2002), who show that, under the Calvo staggering assumption, two models generate very different inflation dynamics, I extend the constant-hazard...

This paper explores the contemporary debate among economists on the means to move the economy toward high employment without inflation-beyond the traditional instruments of monetary and fiscal policy. The authors pay particular attention to the Market Anti-Inflation Plan (MAP), submitted by...

The real effects of an imperfectly credible disinflation depend critically on the extent of price rigidity. In this paper, we examine how credibility affects the outcome of a disinflation in a model with endogenous time-dependent pricing rules. Both the endogenous initial degree of price...

We analyze how weak credibility affects the volatility of consumption spending in a model of exchange-rate-based stabilization that allows for both durable and nondurable goods. The inclusion of durables greatly improves the explanatory power of the weak credibility hypothesis. The hypothesis...

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...

When Sweden left the gold standard on September 27, 1931, the Swedish government declared that the aim of monetary policy should be to stabilize the domestic purchasing power of the Swedish currency, the krona. With this step, price level targeting officially became for the first time the goal...

This paper investigates the relationship between trade openness and the sacrifice ratio for 126 countries from 1973 to 2007. The instrumental variable quantile regression method is used to explain heterogeneous impact of openness on sacrifice ratio, where openness is endogenous. Empirical...

We study the output costs of a reduction in monetary growth in a dynamic general equilibrium model with staggered wages. The money wage is fixed for two periods, and is chosen according to intertemporal optimisation. Agents have labour market monopoly power. We show that the introduction of...

A growing empirical literature addresses the determinants of the sacrifice ratio, an imperfect measure of the tradeoff between inflation and aggregate output. This study endeavors to advance previous studies in three ways. First, the literature does not satisfactorily examine key fiscal and...