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 this paper we incorporate a labor market with matching frictions and wage rigidities into the New Keynesian business cycle model. In particular, we analyze the effect of a monetary policy shock and investigate how labor market frictions affect the transmission process of monetary policy. The...

This paper analyzes the cost of disinflations under real wage rigidities in a micro-founded New Keynesian model. The consensus is that real wage rigidities can be a useful mechanism to induce the inflation persistence that is absent in the standard Calvo model. Real wage rigidities thus generate...

The labor market is receiving increasing attention in the New Keynesian literature. In this paper I critically survey this literature in order to highlight the role played by wage rigidities in the explanation of fluctuations caused by technology shocks. To this aim, I present a DSGE model with...

The labor market is receiving increasing attention in the New Keynesian literature. In this paper I critically survey this literature in order to highlight the role played by wage rigidities in the explanation of fluctuations caused by technology shocks. To this aim, I present a DSGE model with...