This paper analyses the optimal monetary policy under incomplete exchange rate pass-through and asymmetric price rigidity. In a general equilibrium sticky price model of an open economy we find that the optimal interest rate rule is to respond to all types of shocks in an economy: real exchange...

This paper examines the pass-through of cost-push shocks to customers at a granular level. Using unique firm-level survey data, we document five facts about pass-through across firms, sectors, and over time. We highlight a new channel relevant for pass-through: beliefs about the expected...