We analyse the impact of relaxing rules of origin (ROOs) in a simple setting with heterogeneous firms that buy intermediate inputs from domestic and foreign sources. In particular, we consider the impact of switching from bilateral to diagonal cumulation when using preferences (instead of paying...

In a standard dynamic stochastic general equilibrium framework, with sticky prices, the cross sectional distribution of output and inflation across a population of firms is studied. The only form of heterogeneity is confined to the probability that the ith changes its prices in response to a...

This paper examines the current state of price convergence amongst the eleven initial EMU member states. Special attention is given to possible changes in the convergence process during the euro cash changeover. We apply the convergence approach using both panel estimates of changes in the...

We assess the efficiency of monetary policy to guide inflation expectations in high and low regimes. Using quantile regression we analyze the persistence of inflation expectations from the Consensus Economics Survey at different quantiles. We find a) empirical evidence that expectations are not...

Standard New Keynesian (NK) models feature an optimal inflation target well below two percent, limited welfare losses from business cycle fluctuations and long-term monetary neutrality. We develop a NK framework with labour market frictions, endogenous productivity and downward wage rigidity...

We build a two-country currency union DSGE model with endogenous growth to assess the role of cross-country differences in product and labor market regulations for long-term growth and for the adjustment to shocks. We show that with endogenous growth, there is no reason to expect real income...