Recently, there has been considerable work on stochastic time-varying coefficient models as vehicles for modelling structural change in the macroeconomy with a focus on the estimation of the unobserved paths of random coefficient processes. The dominant estimation methods, in this context, are...

This paper undertakes a Bayesian analysis of optimal monetary policy for the U.K. We estimate a suite of monetary-policy models that include both forward- and backward-looking representations as well as large- and small-scale models. We find an optimal simple Taylor-type rule that accounts for...

Over time, economic statistics are refined. This implies that data measuring recent economic events are typically less reliable than older data. Such time variation in measurement error affects optimal forecasts. Measurement error, and its time variation, are of course unobserved. Our...

Why is inflation so much lower and at the same time more stable in developed economies in the 1990s, compared with the 1970s? This paper suggests that the United Kingdom, United States and other countries may have escaped from a volatile inflation equilibrium. Our argument builds on the story...

Using a model of deterministic structural change, we revisit several topics in inflation dynamics explored previously using stochastic, time-varying parameter models. We document significant reductions in inflation persistence and predictability. We estimate that changes in the volatility of...

Canzoneri (1985) and Rogoff (1985) showed that imposing symmetric penalties on a central bank for deviations from an announced inflation target would reduce the Barro-Gordon inflation bias, but only at the expense of distorting the central bank’s stabilization effort. More recently, Walsh...