Over the last twenty years the level and volatility of inflation decreased across industrial countries. The inflation behaviour can be explained by a shift in monetary policy or by a lucky period of low volatility in business cycle shocks. To test the"luck hypothesis" we examine the inflation...

This paper shows that the credibility gain from permanently committing to a fixed exchange rate by joining the European Monetary Union can outweigh the loss from giving up independent monetary policy. When the central bank enjoys only limited credibility a pegged exchange rate regime yields a...

Starting in the mid 1980s, the level and volatility of inflation decreased across industrial countries. The inflation stabilization can be explained by a shift in monetary policy or by a lucky period of low volatility in business cycle shocks. To test the "good luck hypothesis", we examine the...

This paper shows that the credibility gain from permanently committing to a fixed exchange rate by joining the European Monetary Union can outweigh the loss from giving up independent monetary policy. When the central bank enjoys only limited credibility a pegged exchange rate regime yields a...

This paper studies the effect on monetary policy of a non-homogeneous degree of competition across the (two) members of a monetary union. In particular, we assess the welfare loss brought about by the use of a simple interest rate rule that does not take into account such structural differences....

This paper studies the effect on monetary policy of differing degrees of competition and differing degrees of nominal rigidity between the members of a monetary union. In particular, we assess the welfare loss brought about by the use of a simple interest rate rule that does not take into...