The conventional view is that a monetary policy shock has both supply-side and demand-side effects, at least in the short run. Barth and Ramey (2001) show that the supply-side effect of a monetary policy shock may be greater than the demand-side effect. We argue that it is crucial for monetary...

I study the implications of learning by doing in production for optimal monetary policy using a basic New Keynesian model. Learning-by-doing is modeled as a stock of skills that accumulates based on past employment. The presence of this learning-by-doing externality breaks the ’divine...

This paper analyses the relationship between financial stress indicator variables and monetary policy in South Africa with emphasis on how robust these variables are related to the monetary policy interest rate. The financial stress indicator variables comprise a set of variables from the main...

This paper examines the relationship between in‡ation and in‡ation expectations of analysts, business, and trade unions in South Africa during the inflation targeting (IT) regime. We consider inflation expectations based on the Bureau of Economic Research (BER) quarterly survey observed...

A nominal income target may provide credibility to a commitment to keep real interest rates exceptionally low, until a target output level is reached -–even if expected inflation rises in the interim–- in economies where nominal interest rates are effectively at the zero lower bound,...

In 1967 Milton Friedman delivered “The Role of Monetary Policy’ as his presidential address to the American Economic Association (AEA). In its published version – Friedman (1968) – it has become, arguably, the most influential paper in modern monetary economics and was...

This paper studies the impacts of bank capital regulation on business cycle fluctuations. To do so, we adopt the Bernanke et al. (1999) "financial accelerator" model (BGG), to which we augment a banking sector to study the procyclical nature of Basel II claimed in the literature. We first study...

Estimates of the output gap are an important component of policy-makers’ toolkits. Both the theory underlying monetary policy analysis and the empirical models employed by central banks suggest that the output gap is a key variable explaining inflation. In this view, the estimate of the...