A number of central banks in advanced countries use ranges, or bands, around their inflationtarget to formulate their monetary policy strategy. The adoption of such ranges has beenproposed by some policymakers in the context of the Fed and the ECB reviews of theirstrategies. Using a standard New...

We address this question using an estimated New Keynesian DSGE model of the Euro Areawith trend inflation, imperfect indexation, and a lower bound on the nominal interest rate. Inthis setup, a decrease in the steady-state real interest rate, r*, increases the probability ofhitting the lower...

In this paper, using US as well as French sectoral data and indicators of price rigidity, we re-examine the (lack of) relation between price stickiness and inflation persistence. This has recently been put forward by Bils and Klenow (2004) as evidence against time-dependent price setting models....

We study how changes in the value of the steady-state real interest rate affect the optimal inflation target, both in the U.S. and the euro area, using an estimated New Keynesian DSGE model that incorporates the zero (or effective) lower bound on the nominal interest rate. We find that this...

How effective make-up strategies are depends heavily on how forward-looking agents are. Workhorse monetary models, which are much forward-looking, find them so effective that they run into the so-called 'forward-guidance puzzle'. Models that discount the future further find them much less...

In this paper, we estimate two small, forward-looking, macroeconomic models for the US and Germany and we compare the implied optimal monetary policy rules. Both models have a standard structure: an I-S curve, a Phillips curve, a short term interest-rate rule and a long term interest rate...

We use the ECB Survey of Professional Forecasters to characterize the dynamics of expectations at the micro level. We find that forecasters (i) have predictable forecast errors; (ii) disagree; (iii) fail to systematically update their forecasts in the wake of new information; (iv) disagree even...

This paper examines heterogeneity in price stickiness using a large, original, set of individual price data collected at the retail level for the computation of the French CPI. To that end, we estimate, at a very high level of disaggregation, competing-risks duration models that distinguish...

We examine the effect of the minimum wage on restaurant prices. For that purpose, we estimate a price rigidity model by exploiting a unique dataset of individual price quotes used to calculate the Consumer Price Index in France. We find a positive and significant impact of the minimum wage on...

A recent strand of empirical work uses (S, s) models with time-varying stochastic bands to describe infrequent adjustments of prices and other variables. The present paper examines some properties of this model, which encompasses most micro-founded adjustment rules rationalizing infrequent...