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...

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...

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.

We show how to use Hurwitz polynomials to study the stability and uniqueness of Rational Expectation equilibria in Dynamic General Equilibrium models. We apply this method to a model characterized by staggered wage and price contracts and by limited asset market participation (LAMP). We prove...

We show how to use Hurwitz polynomials to study the stability and uniqueness of Rational Expectation equilibria in Dynamic General Equilibrium models. We apply this method to a model characterized by staggered wage and price contracts and by limited asset market participation (LAMP). We prove...

This paper estimates and compares new-Keynesian DSGE monetary models of the business cycle derived under two different pricing schemes - Calvo, Rotemberg - and a positive trend inflation rate. Our empirical findings (i) support trend inflation-equipped models as better fitting during the U.S....