After many years, many critiques, and many variations, the staggered wage and price setting model is still the most common method of incorporating nominal rigidities into empirical macroeconomic models used for policy analysis. The aim of this chapter is to examine and reassess the staggered...

We study the Ramsey optimal monetary policy within the Golosov and Lucas (2007) state-dependent pricing framework. The model provides micro-foundations for a nonlinear Phillips curve: the sensitivity of inflation to activity increases after large shocks due to an endogenous rise in the frequency...