Inflation-targeting central banks have only imperfect knowledge about the effect of policy decisions on inflation. An important source of uncertainty is the relationship between inflation and unemployment. This Paper studies the optimal monetary policy in the presence of uncertainty about the...

Rational expectations are often used as a strong argument against policy activism, as they may undermine or neutralize the policymaker’s actions. Although this sometimes happens, rational expectations do not always imply policy invariance or ineffectiveness. In fact, in certain circumstances...

We use a dynamic factor model to provide a semi-structural representation for 101 quarterly US macroeconomic series. We find that (i) the US economy is well described by a number of structural shocks between two and six. Focusing on the four-shock specification, we identify, using sign...

This paper introduces a new indicator of core inflation for New Zealand, estimated using a dynamic factor model and disaggregate consumer price data. Using disaggregate consumer price data we can directly compare the predictive performance of our core indicator with a wide range of other ‘core...

Understanding how import prices adjust to exchange rates helps anticipate inflation effects and monetary policy responses. This paper examines exchange rate passthrough to the monthly import price index in South Africa during 1980-2009. A methodological innovation allows various short-run...