Understanding the features and the determinants of individual price setting behaviour is important for the formulation of monetary policy. These behavioural mechanisms play a fundamental role in influencing the characteristics of aggregate inflation and in determining how monetary policy affects...

Understanding the determinants of individual price setting behaviour is crucial for the formulation of monetary policy, especially in an economy experiencing ongoing structural change. These behavioural mechanisms play a fundamental role in influencing the characteristics of aggregate inflation...

This paper examines differences between risk-neutral and objective probability densities of future interest rates. The identification and quantification of these differences are important when risk-neutral densities (RNDs), such as option-implied RNDs, are used as indicators of actual beliefs of...

We construct and estimate a joint model of macroeconomic and yield curve dynamics. A small-scale rational expectations model describes the macroeconomy. Bond yields are affine functions of the state variables of the macromodel, and are derived assuming absence of arbitrage opportunities and a...

This paper compares the welfare implications of two widely used pricing assumptions in the New-Keynesian literature: Calvo-pricing vs. Rotemberg-pricing. We show that despite the strong similarities between the two assumptions to a first order of approximation, in general they might entail...