This paper describes optimal monetary policy in an economy with monopolistic competition, endogenous firm entry, a cash-in-advance constraint and pre-set wages. Firms must make profits in order to cover entry costs; thus a mark-up on goods prices is necessary. Without this mark-up, profits would...

The popular Calvo model with indexation (Christiano, Eichenbaum and Evans, 2005) and sticky information (Mankiw and Reis, 2002) model have guided much of the monetary policy discussion. The strength of these approaches is that they can explain the persistence of inflation. However, both of these...

In this paper, we analyze coordination of macroeconomic stabilization policies within the EMU by focusing, in a dynamic set-up, on asymmetries, externalities, and the existence of a multi-country context. We study how coalitions among fiscal and monetary authorities are formed and what are their...

This paper investigates the empirical relevance of a new framework for monetary policyanalysis in which decision makers are allowed to weight differently positive and negative deviations of inflation and output from the target values. The specification of the central bank objective is general...

This paper considers the monetary policy implications of a model that features input-output connections between stages of production, so that a distinction between CPI inflation and PPI inflation arises. More specifically, this paper addresses the policy conclusion by K. Huang and Z. Liu [2005,...

We consider a model with frictional unemployment and staggered wage bargaining where hours worked are negotiated for each period. The workers' bargaining power in the working time negotiations affects both unemployment volatility and inflation persistence. The closer to zero this parameter, (i)...

This paper studies the relationships between inflation, economic activity, credit, monetary policy, and residential property and equity prices in 17 OECD countries, using quarterly data for 1986-2006. Using a panel VAR, we find plausible and significant responses to a monetary policy shock....

This paper develops a dynamic stochastic general equilibrium model with interactions between an heterogeneous banking sector and other private agents. We introduce endogenous default probabilities for both firms and banks, and allow for bank regulation and liquidity injection into the...

Research with Keynesian-style models has emphasized the importance of the output gap for policies aimed at controlling inflation while declaring monetary aggregates largely irrelevant. Critics, however, have argued that these models need to be modified to account for observed money growth and...

In most instances, the dynamic response of monetary and other policies to shocks is infrequent and lumpy. The same holds for the microeconomic response of some of the most important economic variables, such as investment, labor demand, and prices. We show that the standard practice of estimating...