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This paper proposes a conceptual framework to investigate the e!ects of central bank independence, of the degree of centralization of wage bargaining and of the interaction between those institutional variables, on real wages, unemployment and in#ation, in a framework in which unions are averse to in#ation. This aversion moderates unions' wage demands as(More)
We model the optimal price setting problem of a firm in the presence of both information and menu costs. In this problem the firm optimally decides when to collect costly information on the adequacy of its price, an activity which we refer to as a price " review ". Upon each review, the firm chooses whether to adjust its price, subject to a menu cost, and(More)
In 2004 all publications will carry a motif taken from the €100 banknote. 1 The views expressed in this paper do not necessarily reflect those of the European Central Bank or the Eurosystem.We are very grateful for advice and encouragement from David Altig, Klaus Masuch and Hans-Joachim Klöckers.The careful editorial assistance of Monica Crabtree is much(More)
We provide an analytical characterization of the optimal anticipated monetary policy in an economy where agents have a precautionary savings motive due to random production opportunities and the presence of borrowing constraints. Non storable production makes intrinsically useless outside money valuable to insure consumption. We show that the choice of the(More)
It is shown that accounting for technology variations, across households and periods, is important to obtain theoretically consistent estimates of the demand for currency. An inventory model is presented where the withdrawal technology is explicitly modeled. Both the level and the interest rate elasticity of cash holdings depend on the withdrawal technology(More)
This paper shows that the effects of a monetary union depend on several labour market features. In particular, the switch from national monetary policies to a common monetary policy usually affects both in¯ation and unemployment, even when all structural parameters of the economy and of unions' and policymakers' preferences remain the same. The benchmark(More)
The 1998 reform of the Italian retail trade sector delegated the regulation of entry of large stores to the regional governments. We use the local variation in regulation to determine the effects of entry barriers on sectoral performance. We address the endogeneity of entry barriers through local fixed effects and using political variables as instruments.(More)