We use a simple model to show that there is a positive relationship between monetary policy preferences for output stability, real rigidity and macroeconomic persistence. This result has two non-trivial implications. First it suggests that output stabilization may be a less desirable policy...

This article points to the potential role of monetary policy in affecting the degree of real wage cyclicality. We show that the degree and direction of real wage cyclicality is determined by the interaction of (i) the returns to scale in production, (ii) the nature of aggregate shocks and (iii)...

This paper shows that in macroeconomic models of product differentiation that are built on CES utility specifications the widely used assumption of approximating cross price effects to zero, (since Dixit-Stiglitz 1979), plays indeed no crucial role. This is true not only when a large number of...

Using a microfounded general equilibrium model, this paper shows that when large monopolistic firms or unions perceive even a small influence on aggregate nominal variables, price targeting results in a higher equilibrium output than monetary accommodation. This is because price targeting...