Many empirical studies have found that interest rate increases have a positive effect on the price level. This paper pursues an obvious, but neglected explanation: interest payments are a cost of production that is at least in part passed on to customers. A model shows that the cost- push effect...

This paper proposes a novel Maximum Likelihood (ML) strategy to estimate Euler equations implied by dynamic stochastic theories. The strategy exploits rational expectations cross-equation restrictions, but circumvents the problem of multiple solutions that arises in Sargent's (1979) original...

El tema de la inflación ha sido uno de los más debatidos en los últimos meses. Los incrementos de precios registrados en el primer trimestre de 2005 han avivado la discusión. Este trabajo muestra que el problema está lejos de estar fuera de control y que determinadas medidas de política...

During the last two decades of the twentieth century, Brazil went through a sequence of failed stabilization plans that tried to cope with an enduring hyperinflation. This paper uses a money demand model to evaluate monetary policies during those episodes. The consistency between the money...

The paper offers a new explanation for the cause of the Great Inflation by constructing a model that explicitly separates the roles of government and monetary policymakers. A mechanism that inflation can accelerate even if an inflation target is low is uncovered. The model solves the puzzle of...

This paper shows the way how persistent world inflation shocks hitting a small open economy can re-weight the importance of domestic and foreign factors in the determination of prices. In this sense, we study why the recently observed global disinflation environment may imply a weakening of the...

Morocco and Tunisia have started to open their markets to international trade and capital flows in order to bolster investment and growth. These liberalization programs require important adjustments in their economic policies, in particular their exchange rate regimes and monetary policies. This...