Price stability has become the predominant goal for monetary policy. Should the aim be zero inflation or could inflation be too low making it better to strive for a stable (low) positive rate of inflation? This paper analyses why inflation may interact with downward nominal rigidities so as to...

It is often hypothesized that costs of adjusting both price and quantities may have important implications for the macroeconomic adjustment process, not least to nominal shocks. We analyse this in an explicit intertemporal general equilibrium model considering the empirically relevant case of...

This paper aims at identifying and quantifying different sources of persistency in employment adjustment. Based on a dynamic labour market model an explicit distinction is made between real and nominal (prices and wage) propagation mechanisms. The theoretical analysis provides the basis for an...

This paper analyzes the real and monetary effects of a shift in the exchange-rate policy in an economy where the private sector is uncertain about the true intentions of the government. In a finitely repeated game of incomplete information, the authors show that a shift towards a tight, fixed...

This paper takes a first step in analysing how a monetary union performs in the presence of labour market asymmetries. Differences in wage flexibility, market power and country sizes are allowed for in a setting with both country-specific and aggregate shocks. The implications of asymmetries for...

International product market integration enhances both export possibilities through easier access to foreign markets, but also the import threat arising from foreign firms penetrating into the domestic market. These mechanisms affect wage formation and employment creation through many channels...

The aim of this paper is to clarify the policy strategies pursued in the Nordic countries in the 1970s and 1980s to attain internal and external balance. A distinction is made between (1) a bridging strategy, (2) a sheltering or adaptive strategy, and (3) a production strategy of export-led...

The interaction between a common monetary policy targeting inflation and decentralized fiscal policies aiming at output stability is considered in a setting taking into account interdependencies between countries running via trade links and the common monetary policy. The setting is sufficiently...

The ability of insiders to extract rents associated with exogenous turnover costs is addressed in a dynamic model. The higher these rents, the higher is the incentives for outsiders to obtain future insider status and, thus, to underbid current insiders. As a consequence, there is a lower limit...