This paper compares the welfare effects of anticipated and unanticipated cost-push shocks within the canonical New Keynesian model with optimal monetary policy. We find that, for empirically plausible degrees of nominal rigidity, the anticipation of a future cost-push shock leads to a higher...

We show that low trend inflation strongly affects the dynamics of a standard Neo-Keynesian model where monetary policy is described by a standard Taylor rule. Moreover, trend inflation enlarges the indeterminacy region in the parameter space, substantially altering the so-called Taylor...

In sticky price models with endogenous investment, virtually all monetary policy rules that set a nominal interest rate in response solely to future inflation induce real indeterminacy of equilibrium. Applying the Samuelson-Farebrother conditions, we obtain a necessary and su?cient condition for...

This introductory essay briefly summarizes the eleven empirical studies of price setting and price adjustment that are included in this special issue. The studies, which use data from several European countries, were conducted as part of the European Central Bank's Inflation Persistence Network

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...

This paper aims to contribute to our understanding of inflation dynamics in the United Kingdom by estimating two dynamic stochastic general equilibrium models and assessing the role of nominal and real rigidities within them. We first obtain an empirical representation of the monetary...

Starting from the assumption that firms are more likely to adjust their prices when doing so is more valuable, this paper analyzes monetary policy shocks in a DSGE model with firm-level heterogeneity. The model is calibrated to retail price microdata, and inflation responses are decomposed into...

The real effects of an imperfectly credible disinflation depend critically on the extent of price rigidity. We examine this interaction in a model with endogenous time-dependent pricing. Both the endogenous initial degree of price rigidity and changes in the duration of price spells during...

This introductory essay briefly summarizes the eleven empirical studies of price setting and price adjustment that are included in this special issue. The studies, which use data from several European countries, were conducted as part of the European Central Bank's Inflation Persistence Network

The relative prices of different categories of consumption goods have been trending over time. Assuming they are exogenous with respect to monetary policy, these trends imply that monetary policy cannot stabilize the prices of all consumption categories. If prices are sticky, monetary policy...