This paper uses a factor-augmented vector autoregression technique to examine the role that macroeconomic and sector-specific factors play in UK price fluctuations at the aggregate and disaggregated levels. Macroeconomic factors are less important for disaggregated prices than aggregate ones....

This paper proposes a method for detecting the sources of misspecification in a dynamic stochastic general equilibrium (DSGE) model based on testing, in a data-rich environment, the exogeneity of the variables of the DSGE with respect to some auxiliary variables. Finding evidence of...

This paper aims to contribute to our understanding of inflation dynamics in the United Kingdom by estimating two dynamic stochastic general equilibrium models and assessing the role of nominal and real rigidities within them. We first obtain an empirical representation of the monetary...

This paper analyses the conduct of monetary policy in an environment where households’ desire to amass precautionary savings is influenced by fluctuations in the volatilities of disturbances that hit the economy. It uses a simple New Keynesian model with external habit formation that is...

This paper develops a fast method of computing arbitrary order perturbation approximations to bond prices in DSGE models. The procedure is implemented to third order where it can shorten the approximation process by more than 100 times. In a consumption-based endowment model with habits, it is...

This paper analyses the conduct of monetary policy in an environment in which cyclical swings in risk appetite affect households’ propensity to save. It uses a New Keynesian model featuring external habit formation to show that taking note of precautionary saving motives justifies an...

This paper considers the implications for the United States, the United Kingdom and the rest of the world (ROW) of shocks that may contribute to a further reduction in global current account imbalances using a dynamic stochastic general equilibrium (DSGE) model. We consider a shock that...

We estimate a New Keynesian model with matching frictions and nominal wage rigidities on UK data. We are able to identify important structural parameters, recover the unobservable shocks that have affected the UK economy since 1971 and study the transmission mechanism. With matching frictions,...

We build a small open economy dynamic stochastic general equilibrium model, featuring many types of nominal and real frictions that have become standard in the literature. In recent years it has become possible to estimate such models using Bayesian methods. These exercises typically involve...