We consider two aspects of the commitment problem in price regulation with lobbying the ratchet effect and the hold-up problem. We set out a dynamic model of price regulation with asymmetric information where the regulated firm can ‘buy influence’ in a lobbying equilibrium. Firms can sink...

The Rational Expectations Permanent Income Hypothesis implies that consumption follows a random walk. However, most empirical tests have rejected the hypothesis. Those empirical tests are based on linear models. If the data generating process is non-linear, conventional tests may not be able to...

This paper contributes to the permanent income hypothesis (PIH) and excess consumption smoothness debate in the context of fractional integration. We show that the excess consumption smoothness result is a consequence of the quarterly data frequency commonly employed in empirical work. In fact,...

The lumpy nature of plant-level investment is generally not taken into account in the context of monetary theory (see, e.g., Christiano et al. 2005 and Woodford 2005). We formulate a generalized (S,s) pricing and investment model which is empirically more plausible along that dimension....

Using a novel dataset from a large supermarket retailer in a European country that never engages in temporary sales, we establish that prices are actually as sticky as regular prices. Circumventing the debate on whether sales have to be included or excluded from price adjustments, we find...

It is standard to model the output-inflation trade-off as a linear relationship with a time-invariant slope. We assess empirical evidence for three types of nonlinearity in the short-run Phillips curve. At an empirical level, we aim to discover why large negative output gaps in Japan during the...

We analyze the importance of global shocks for the global economy and national policy makers. More specifically, we investigate whether monetary policy has become less effective in the wake of financial globalization. We also examine whether there is increasing uncertainty for central banks due...

This paper estimates the Brazilian NAILO (Nonaccelerating Inflation Level of Output), obtains (Bayesian) probability bands for the Nailo and for its growth rate, and investigates the relationship between deviations of output with respect to the Nailo and the acceleration of inflation. As...

Uncertainty about the future path of inflation affects consumption, saving and investment decisions as well as wage negotiations and price setting of firms. These decisions are based on inflation expectations which are a key determinant of inflation in the New Keynesian Phillips Curve. In this...

A.W.H. Phillips is little known to the economics profession today, except at the creator of the Phillips curve. Bollard's engaging biography tells the story of a provincial New Zealander and practical engineer, who emerges as a hero in World War II, and plots a spectacular rise from 3rd class...