This paper employs stochastic simulations of a small structural rational expectations model to investigate the consequences of the zero bound on nominal interest rates. We find that if the economy is subject to stochastic shocks similar in magnitude to those experienced in the U.S. over the...

Pricing-to-market (PTM) behaviour implies that exporters adjust their prices to the prevailing prices in their export markets. For the importing country, PTM effects can be interpreted as a measure of the stability of domestic prices against foreign price and exchange rate developments. PTM...

Over the past 15 years there has been remarkable progress in the specification and estimation of dynamic stochastic general equilibrium (DSGE) models. Central banks in developed and emerging market economies have become increasingly interested in their usefulness for policy analysis and...