This paper studies monetary policy rules in a small open economy with Inflation Targeting, incomplete pass-through and rigid nominal wages. The paper shows that, when nominal wages are fully flexible and pass-through is low to moderate, the monetary authority should target the consumer price...

In a VAR model of the US, the response of the relative price of durables to a monetary contraction is either flat or mildly positive. It significantly falls only if narrowly defined as the ratio between new house and nondurables prices. These findings survive three identification strategies and...

In an attempt to find out the degree of monetary non-neutrality in Nigeria we started from finding out the size of price rigidity in the country. Computation with Ball and Romer method showed that price rigidity is optimal decision for firms in Nigeria only when the menu cost is well above 2.28%...

A persistent criticism of general equilibrium models of monetary policy which incorporate nominal inertia in the form of the New Keynesian Phillips Curve (NKPC) is that they fail to capture the extent of inflation inertia in the data. In this paper we derive a general equilibrium model based on...

We build a two-country version of the model in Gali & Monacelli (2005), which extends for a small open economy the new Keynesain DSGE model used as tool for monetary policy analysis in closed economies. A distinctive feature of the model is that the terms of trade enters directly into the new...

We determine optimal monetary policy under commitment in a forward-looking New Keynesian model when nominal interest rates are bounded below by zero. The lower bound represents an occasionally binding constraint that causes the model and optimal policy to be nonlinear. A calibration to the U.S....

We determine optimal monetary policy under commitment in a forward-looking New Keynesian model when nominal interest rates are bounded below by zero. The lower bound represents an occasionally binding constraint that causes the model and optimal policy to be nonlinear. A calibration to the U.S....

We use microdata to estimate the strength of price selection - a key metric for the effect of monetary policy on the real economy. We propose a product-level proxy for mispricing and assess whether products with larger mispricing respond with a higher probability to identified monetary and...

We determine optimal discretionary monetary policy in a New-Keynesian model when nominal interest rates are bounded below by zero. Nominal interest rates should be lowered faster in response to adverse shocks than in the case without bound. Such "preemptive easing" is optimal because...

We determine optimal monetary policy under commitment in a forwardlooking New Keynesian model when nominal interest rates are bounded below by zero. The lower bound represents an occasionally binding constraint that causes the model and optimal policy to be nonlinear. A calibration to the U.S....