We show that short and long nominal interest rates are independent monetary policy instruments. The pegging of both helps solving the problem of multiplicity that arises when only short rates are used as the instrument of policy. A peg of the nominal returns on assets of different maturities is...

We derive principles of optimal short run monetary policy in a real business cycles model, with money and with monopolistic firms that set prices one period in advance. The only distortionary policy instruments are the nominal interest rates and the money supplies. In this environment it is...

This paper assesses the relevance of the exchange rate regime for stabilization policy. This regime question cannot be dealt with independently of other institutions, in particular how .fiscal policy is designed. We show that once .fiscal policy is taken into account, the exchange rate regime is...

This paper examines the long-term earnings losses of displaced workers in Portugal, using a nationally representative longitudinal linked employer-employee data set. The results show that four years after displacement the earnings of displaced workers remain around 9% (women) to 12% (men) below...

This paper concerns entry mistakes when the incumbent practices strategic pricing. It is shown that an entry mistake may be a Pareto outcome. Due to an agency problem between the owner and the manager of the entrant firm there may be pooling sequential equilibria with too much entry that are...

We compare theoretical and empirical forecasts computed by rational agents living in a model economy to those produced by professional forecasters. We focus on the variance of the prediction errors as a function of the forecast horizon and analyze the speed with which it converges to a constant...

We quantitatively assess the macroeconomic effects of country-specific supply-side reforms in the euro area by simulating a large scale multi-country dynamic general equilibrium model. We consider reforms in the labor and services markets of Germany (or, alternatively, Portugal) and the rest of...

How important are collateral constraints for the propagation and amplification of shocks? To address this question, we analyze a stochastic general equilibrium version of the model by Kiyotaki and Moore (JPE, 1997) in which all agents face concave production and utility functions and are...