In 1999 the Colombian Constitutional Court ruled that annual minimum wage increases should not be lower than the inflation of the previous year. This article explores the impact of this decision on the effectiveness of monetary policy, and shows that the obligation to adjust the salary to past...

We build a two-bloc emerging market - rest of the world model. The emerging market bloc incorporates partial transactions and liability dollarization, as well as financial frictions including a ‘financial accelerator’, where capital financing is partly or totally in foreign currency as in...

It is shown that, in contrast to models with fixed labour, a change in monetary policy involving an increase in the inflation rate would have the same qualitative effects on steady state capital, consumption, and employment, regardless of whether only consumption or both consumption and...

We compare international monetary arrangements that differ in the degree of both policy activism and exchange rate flexibility in a model with policy credibility, nominal wage rigidities and unobservable shocks. Three results stand out. First, the selection of the exchange rate regime is less...

This paper investigates the conditions under which interest-rate rules induce real equilibrium indeterminacy in a two-country, sticky-price, monetary model. Using a discrete-time framework, we employ the two most commonly used timing assumptions on which money balances enter into the utility...

This paper presents a two-country sticky-price model that allows for capital and investment spending. It analyzes the conditions for equilibrium determinacy under alternative interest-rate rules that react to either domestic or consumer price inflation. It is shown that in the presence of...

This paper investigates the conditions under which interest-rate rules induce real equilibrium indeterminacy in a two-country, sticky-price, monetary model. Using a discrete-time framework, we employ the two most commonly used timing assumptions on which money balances enter into the utility...

In most instances, the dynamic response of monetary and other policies to shocks is infrequent and lumpy. The same holds for the microeconomic response of some of the most important economic variables, such as investment, labor demand, and prices. We show that the standard practice of estimating...