This paper provides a comparison of monetary policy rules with make-up and/or asymmetric elements for a heterogeneous agent New Keynesian (HANK) model. The model features incomplete financial markets, nominal price and wage rigidities, rational expectations, an occasionally binding effective...

We study the impact of market incompleteness and bounded rationality on the effectiveness of make-up strategies. To do so, we simulate a heterogeneous-agent New Keynesian (HANK) model with reflective expectations and an occasionally-binding effective lower bound (ELB) on the policy rate. Our...

We study the impact of market incompleteness and bounded rationality on the effectiveness of make-up strategies. To do so, we simulate a heterogeneous-agent New Keynesian (HANK) model with reflective expectations and an occasionally-binding effective lower bound (ELB) on the policy rate. Our...

Heterogeneous-agent New Keynesian models with sticky nominal wages usually assume that wage-setting unions demand the same amount of hours from all households. As a result, unions do not take account of the fact that (i) households are heterogeneous in their willingness to work, and that (ii)...

We compare the stabilisation properties of history-dependent and asymmetric interest rate rules, taking into account the constraint posed by the effective lower bound on nominal interest rates. Specifically, we use a medium-scale Two-Agent New Keynesian (TANK) model that was estimated on euro...

Optimal policy projections (OPPs) offer a flexible way to derive scenario-based policy recommendations. This note describes how to calculate OPPs for a simple textbook New Keynesian model and provides illustrations for various examples. It also demonstrates the versatility of the approach by...

Heterogeneous-agent New Keynesian models with sticky nominal wages usually assume that wage-setting unions demand the same amount of hours from all households. As a result, unions do not take account of the fact that (i) households are heterogeneous in their willingness to work, and that (ii)...

Optimal policy projections (OPPs) offer a flexible way to derive scenario-based policy recommendations. This note describes how to calculate OPPs for a simple textbook New Keynesian model and provides illustrations for various examples. It also demonstrates the versatility of the approach by...

The ECB’s price stability mandate has been defined by the Treaty. But the Treaty has not spelled out what price stability precisely means. To make the mandate operational, the Governing Council has provided a quantitative definition in 1998 and a clarification in 2003. The landscape has...