We estimate an open economy dynamic stochastic general equilibrium (DSGE) model of Australia with a number of shocks, frictions and rigidities, matching a large number of observable time series. We find that both foreign and domestic shocks are important drivers of the Australian business cycle....

Monetary policy is conducted in an environment of uncertainty. This paper sets up a model where the central bank uses real-time data from the bond market together with standard macroeconomic indicators to estimate the current state of the economy more efficiently, while taking into account that...

In earlier work (Fuhrer 1997a), I document what I view as the failure of standard models of representative consumer and firm behaviour to replicate the dynamics that we observe in the aggregate data. In essence, these models fail because they imply that both inflation and real variables must...

This paper reviews issues in the econometric modelling of monetary policy in the light of recent experience and research. Two main sets of issues are covered: first, the operation of policy including the specification of the instrument and objectives; and second, the transmission of monetary...

In a model where the risk premium on long-term debt is, in part, endogenously determined, we study two kinds of unconventional monetary policy: long-term nominal interest rates as operating instruments of monetary policy and announcements about the future path of the short-term rate. We find...

This paper studies two types of interest rate rules that involve long-term nominal interest rates in the context of a New Keynesian model. The first type considers the possibility of adding longer-term rates to the list of variables the central bank reacts to in setting its short-term rate. The...

Long-term nominal interest rates in a number of inflation-targeting small open economies have tended to be highly correlated with those of the United States. This observation has recently lent support to the view that the long end of the yield curve is determined abroad. We set up and estimate a...