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Policy coordination and macroeconomic stability under sovereign risk
Policy coordination and macroeconomic stability under sovereign risk

... eign default reduces the effective real rate of return on government bonds, inducing private lenders to reduce their holdings of bonds and raise consumption, which in turn pushes up the price level. Inflation and debt dynamics can thus no longer be determined separately and the standard requirement ...
Sofia Bauducco Optimal Policy, Heterogeneity and Limited Commitment Prof. Albert Marcet
Sofia Bauducco Optimal Policy, Heterogeneity and Limited Commitment Prof. Albert Marcet

... productive agents. Second, inflation acts as a regressive consumption tax, which favors rich and productive agents. I calibrate the model economy to the U.S. economy and compute the optimal policy mix. Some key targets are the correlation between money and asset holdings, the fraction of consumption ...
Monetary policy, doubts and asset prices
Monetary policy, doubts and asset prices

... productivity shocks is to keep prices stable no matter what is the degree of distrust that the agents might have.5 Dupor (2005) analyzes optimal monetary policy in a New-Keynesian model in which only the investment decisions are distorted by an ad hoc irrational expectational shock. In our framework ...
June 11
June 11

... relevant questions, by a panel of subject teachers. This mark scheme includes any amendments made at the standardisation meeting attended by all examiners and is the scheme which was used by them in this examination. The standardisation meeting ensures that the mark scheme covers the candidates’ res ...
Download PDF
Download PDF

... away from optimal the adjusting prices had become before they were adjusted. The absolute size of price adjustment should therefore be highly informative about inefficient price dispersion. We show that the mean absolute size of price changes in the U.S. is essentially flat over our entire sample pe ...
Nominal GDP Targeting Rules: Can They Stabilize the Economy?
Nominal GDP Targeting Rules: Can They Stabilize the Economy?

... setting policy.15 In this version of the rule, policymakers would adjust a current interest rate until the consensus private forecast for next year equals the targeted nominal GDP growth rate. Both rules have merits. In principle, the forecast rule would prove superior to the lagged adjustment rule ...
Fiscal Policy in a Currency Union at the Zero Lower Bound ∗
Fiscal Policy in a Currency Union at the Zero Lower Bound ∗

... is the steady state share of ...
MONETARY POLICY UNDER A NEW KEYNESIAN PERSPECTIVE
MONETARY POLICY UNDER A NEW KEYNESIAN PERSPECTIVE

... higher relative prices as a premium in compensation for the risk that oil price volatility generates on their marginal costs. Chapter 3 uses the model laid out chapter 2 to investigate how monetary policy should react to oil shocks. The main result is oil price shocks generate a trade-off between in ...
Empirical Evidence for Germany
Empirical Evidence for Germany

... empirically that aggregate inflation is correlated with the cross-section variance of sectoral relative price changes (see, e.g. Fischer (1982) and Franz (1985)). Given that Ball and Mankiw (1995) have stressed that the skewness rather than the variance of the cross-section of sectoral relative priv ...
Endogenous Wage Indexation and Aggregate
Endogenous Wage Indexation and Aggregate

... Dirk Van de gaer, Raf Wouters, Steffen Ahrens and seminar and conference participants at Ghent University, the 2013 Spring Meeting of Young Economists, the 2013 EEA-ESEM in Gothenburg for their comments. All remaining errors are our own. Any views expressed herein are those of the authors and do not ...
NATIONAL BANK OF POLAND WORKING PAPER No. 135
NATIONAL BANK OF POLAND WORKING PAPER No. 135

... was reflected in the development of the two-pillar approach to monetary policy of the European Central Bank. The ECB’s monetary pillar signals inflationary pressures in medium and long term, whereas the second one, usually called ...
The role of the natural rate of interest in monetary policy
The role of the natural rate of interest in monetary policy

Emerging Countries and Inconsistencies in Macroeconomic Policy
Emerging Countries and Inconsistencies in Macroeconomic Policy

... report with the following words: ―The case studies suggest that a systematic, transparent, and market based policy implementation approach can help reduce conflicts between the inflation objective and other considerations in an inflation targeting framework. Use of the interest rate as the main mone ...
The Effects of Quantitative Easing in the United States: Implications
The Effects of Quantitative Easing in the United States: Implications

... In 2008, economies around the world experienced a financial crisis. Sparked by a housing boom and credit terms that allowed many to borrow extensively, as well as a subsequent saturation in home ownership and a rise in interest rates (causing several subprime borrowers to default on their loans) in ...
2015-16 - University of Glasgow
2015-16 - University of Glasgow

... In this paper we explore the optimal delegation of monetary policy to an independent central banker in the context of a policy making environment where that monetary policy maker will inevitably interact with a fiscal policy maker. This is in contrast to the established literature which typically co ...
Economic Ideas, the Monetary Order and the Uneasy Case for
Economic Ideas, the Monetary Order and the Uneasy Case for

... do have widely accepted models of how the monetary economy functions to guide the choice of feasible policy goals and help deduce what policy makers have to do to achieve them in the face of the myriad shocks to which the economy is subject. And should a skeptical commentator with a longish memory r ...
PL 1 - Alvinisd.net
PL 1 - Alvinisd.net

... inverse relationship between money wage changes and unemployment in the British economy over the period examined ...
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Deflation and Public Finances: Evidence from the Historical
Deflation and Public Finances: Evidence from the Historical

... structure, together with downward rigidities in sovereign interest rates, tends to further compound this increase. At the same time, a number of nominal flow variables—such as revenue and nominal GDP but also, to a smaller extent, expenditure—tend to decrease mechanically. This study investigates th ...
The output gap and inflation - Bank for International Settlements
The output gap and inflation - Bank for International Settlements

... demand. To induce a greater supply of labour, firms must bid up the real wage rate (this is consistent with a large variety of labour market models). To work existing capital beyond its optimum can also bid up costs per unit of output. On both counts costs rise and, with a constant mark-up of prices ...
NBER WORKING PAPER SERIES DSGE MODELS FOR MONETARY POLICY ANALYSIS Mathias Trabandt
NBER WORKING PAPER SERIES DSGE MODELS FOR MONETARY POLICY ANALYSIS Mathias Trabandt

... can be used to identify potential pitfalls for the Taylor principle. In particular, a policyinduced rise in the nominal interest rate may destabilize the economy by perversely giving a direct boost to inflation. This can happen if the standard model is modified to incorporate a so-called working cap ...
NBER WORKING PAPER SERIES ADJUSTING DEPRECIATION IN AN INFLATIONARY
NBER WORKING PAPER SERIES ADJUSTING DEPRECIATION IN AN INFLATIONARY

... with respect to their relative price.3 If the supply of funds is perfectly 1To take an extreme example, consider an investment with a one year life, a net cost of $100 and a rate of return of 10 percent. A 5 percent increase in the net cost cuts the return in half while a 10 percent increase in net ...
Housing  and Consumption in Spain  Paloma Taltavull de La Paz
Housing and Consumption in Spain Paloma Taltavull de La Paz

... since the initial takeoff will be produced slowly, while employment recovers, and being pushed towards the housings demand by reasons of use. Behaviour on residential supply appears to work with these mechanism, showing as housing development answer to economic incentives that lead the demand. Howev ...
Measuring the equilibrium real interest rate
Measuring the equilibrium real interest rate

Mohan Bijapur Are credit crunches supply or demand shocks?
Mohan Bijapur Are credit crunches supply or demand shocks?

... in that the long run effect on output of credit shocks seems to have become stronger in recent decades. However, the inflation response has become weaker. We interpret these findings in the context of the broader debate on the causes of the “Great Moderation”. Our results also inform the ongoing pol ...
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Inflation targeting

Inflation targeting is a monetary policy in which a central bank has an explicit target inflation rate for the medium term and announces this inflation target to the public. The assumption is that the best that monetary policy can do to support long-term growth of the economy is to maintain price stability. The central bank uses interest rates, its main short-term monetary instrument.An inflation-targeting central bank will raise or lower interest rates based on above-target or below-target inflation, respectively. The conventional wisdom is that raising interest rates usually cools the economy to reign in inflation; lowering interest rates usually accelerates the economy, thereby boosting inflation.
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