Is inflation persistence in the new EU Member States (NMS) comparable to that in the euro area countries? We argue that persistence may not be as different between the two country groups as one might expect. We confirm that one should work carefully with the usual estimation methods when...

This paper provides a comprehensive analysis of the functional form of the euro area Phillips curve over the past three decades. In particular, compared to previous literature we analyse the stability of the relationship in detail, especially as regards the possibility of a time-varying mean of...

In the paper, we provide a critical and selective survey of arguments relevant for the assessment of the case for price level path stability (PLPS). Using a standard hybrid new Keynesian model we argue that price level stability provides a natural framework for monetary policy under commitment....

Using a structural VAR with time-varying parameters and stochastic volatility on post-WWII U.S. data, we document a striking negative correlation between the evolution of the long-run coefficient on inflation in the monetary rule and the evolution of the persistence and predictability of...

Central bankers’ conventional wisdom suggests that nominal interest rates should be raised to implement a lower inflation target. In contrast, I show that the standard New Keynesian monetary model predicts that nominal interest rates should be decreased to attain this goal. Real interest...

This paper studies stabilisation policies in a multi-country currency union of small open economies. It abstracts from key factors favouring currency union formation, such as reduced transaction costs and enhanced credibility, which are exogenous to the factors studied here. Demand-side shocks...

During the turbulent 1970s and 1980s the Bundesbank established an outstanding reputation in the world of central banking. Germany achieved a high degree of domestic stability and provided safe haven for investors in times of turmoil in the international financial system. Eventually the...

This paper provides a summary of current knowledge on inflation persistence and price stickiness in the euro area, based on research findings that have been produced in the context of the Inflation Persistence Network. The main findings are - i) Under the current monetary policy regime, the...

In a closed economy context there is common agreement on price inflation stabilization being one of the objects of monetary policy. Moving to an open economy context gives rise to the coexistence of two measures of inflation: domestic inflation (DI) and consumer price inflation (CPI). Which one...

The present paper compares the performance in terms of second order accurate welfare of opportunistic non-linear Taylor rules and with respect to traditional linear Taylor rules. The macroeconomic model representing the benchmark for the analysis includes capital accumulation (with quadratic...