This paper estimates and compares New-Keynesian DSGE monetary models of the business cycle derived under two different pricing schemes—Calvo (1983) and Rotemberg (1982)—under a positive trend inflation rate. Our empirical findings (i) support trend inflation as an empirically relevant...

Since the ’80s the volatility of output growth and inflation experienced by several industrialized countries has remarkably declined, what has been dubbed the “Great Moderation”. Various explanations have been proposed and likely all play some role. This paper shows that when an industrial...

We study the design of monetary policy in an economy characterized by staggered wage and price contracts together with limited asset market participation (LAMP). Contrary to previous results, we find that once nominal wage stickiness, an incontrovertible empirical fact, is considered: i) the...

This paper shows that nominal rigidities in terms of price stickiness acts as a powerful supply-shock filter that reduces the overall economic instability. Considering a range of admissable values for price stickiness, the volatility of inflation, output and interest rate induced by technology...

Since the '80s the volatility of output growth and inflation experienced by several industrialized countries has remarkably declined, what has been dubbed the "Great Moderation". Various explanations have been proposed and likely all play some role. This paper shows that when an industrial...

This paper estimates and compares New-Keynesian DSGE monetary models of the business cycle derived under two different pricing schemes - Calvo (1983) and Rotemberg (1982) - under a positive trend inflation rate. Our empirical findings (i) support trend inflation as an empirically relevant...

Calvo pricing implies output gains, while Rotemberg pricing implies output losses after a disinflation. Introducing real wage rigidities has opposite effects: it generates a long-lasting boom in output in Calvo, and a moderate output slump in Rotemberg.