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...

This paper analyses the role of inflation expectations in the euro area. On one hand, the question is how inflation expectations affect both inflation and output, and, on the other hand, how inflation expectations reflect developments in these variables. The analyses make use of a simple VAR...

Deterministic simulations with the Reserve Bank of New Zealand’s core FPS model show how New Zealand’s broad macroeconomic environment might have evolved over the 1990s, if a US nominal yield curve and US TWI exchange rate movements under a common currency arrangement had been...

This paper looks at the impact on Australia’s trade in crops (non-wheat grains and oilseeds) where GM technology has been introduced. The model includes assumptions about the productivity gains of GM crops, possible consumer responses and regulatory costs for Australia and its major trading...

This paper presents an estimated model with learning and provides evidence that learning can improve the fit of popular monetary DSGE models and endogenously generate realistic levels of persistence. The paper starts with an agnostic view, developing a model that nests learning and some of the...

During the decade of the 1970’s the US economy unexpectedly suffered from “stagflation” namely, high unemployment, slowed economic growth and high rates of inflation. During the 1980’s the major macroeconomic problem became high interest rates and massive government deficits....

This paper assesses empirically the two main alternative specifications of the output gap-based Phillips relation for the euro area: the older expectations-augmented Phillips curve and the new Keynesian Phillips curve. The main focus is on the role of expectations and comparison of the two...

In this paper we establish a link between the volatility of oil price shocks and a positive expected value of inflation in equilibrium (inflation premium). In doing so, we implement the perturbation method to solve up to second order a benchmark New Keynesian model with oil price shocks. In...