The paper analyses the performance of simple interest rate rules which feature a response to noisy observations of inflation, output and money growth. The analysis is based on a small empirical model of the hybrid New Keynesian type which has been estimated on euro area data by Stracca (2007)....

The paper develops an empirical no-arbitrage Gaussian affine term structure model to explain the dynamics of the German term structure of interest rates from 1979 through 1998. In contrast to most affine term structure models two risk factors that drive the dynamics are linked to observable...

In this paper an anti-cyclical fiscal policy rule is introduced into a dynamic stochastic general equilibrium model with New-Keynesian features. The rule allows the deficit to deviate from target in proportion to the impact of automatic stabilisers while any additional impact on the deficit, for...

In the study, the relevance of several optimum-currency-area (OCA) criteria is formally worked out in a welfare approach. The optimum monetary-policy rules of the supranational central bank are derived within the Barro-Gordon framework, and consideration is given to how the welfare of the member...

This paper studies the importance of money for inflation in the euro area. An inflation equation is derived from a small model that combines the supply and demand for money with a Phillips curve and the assumption that inflation expectations develop adaptively. The model's solution attributes an...

This paper examines the methods used by the Bank of Japan for the estimation of the output gap. Attention is paid to the real-time estimation problem. After reviewing the evolution of output gap estimation at the Bank, I discuss advantages and disadvantages of the various output gap measures....

I analyze how the introduction of financial frictions can affect the trade-off between output stabilization and inflation stability and whether, in the presence of financial frictions, the optimal outcome can be realized or approached more closely if monetary policy is allowed to react to...

We examine the global dimension of inflation in 24 OECD countries between 1980 and 2007 in a traditional Phillips curve framework. We decompose output gaps and changes in unit labor costs into common (or global) and idiosyncratic components using a factor analysis and introduce these components...

We start from the assertion that a useful monetary policy design should be founded on more realistic assumptions about what policymakers can know at the time when policy decisions have to be made. Since the Taylor rule – if used as an operational device - implies a forward looking behaviour,...

We estimate the low-frequency relationship between fiscal deficits and inflation and pay special attention to its potential time variation by estimating a time-varying VAR model for U.S. data from 1900 to 2011. We find the strongest relationship neither in times of crisis nor in times of high...