Changes in monetary policy are typically implemented gradually, an empirical observation known as interest-rate smoothing. We propose an explanation of optimal interest-rate smoothing by applying the recent lesson from the related literature on the monetary transmission mechanism that...

The thesis analyzes monetary and labor policies under different market frictions. In the first part several versions of a microfounded dynamic general equilibrium model with monopolistic competitors in the product and/or labor market are derived and simulated. First of all, the monetary...