The Paper presents a model in which the exogenous money supply causes changes in the inflation rate and the output growth rate. While inflation and growth rate changes occur simultaneously, the inflation acts as a tax on the return to human capital and in this sense induces the growth rate...

United States Phillips curves are routinely estimated without accounting for the shifts in mean inflation. As a result we may expect the standard estimates of Phillips curves to be biased and suffer from ARCH. We demonstrate this is indeed the case. We also demonstrate that once the shifts in...

In deciding a monetary policy stance, central bankers need to evaluate carefully the risks the current economic situation poses to price stability. We propose to regard the central banker as a risk manager who aims to contain inflation within pre-specified bounds. We develop formal tools of risk...

While forecasting is a common practice in academia, government and business alike, practitioners are often left wondering how to choose the sample for estimating forecasting models. When we forecast inflation in 2014, for example, should we use the last 30 years of data or the last 10 years of...

‘Modern’ Phillips curve theories predict inflation is an integrated, or near integrated, process. However, inflation appears bounded above and below in developed economies and so cannot be ‘truly’ integrated and more likely stationary around a shifting mean. If agents believe inflation...

Several authors have recently interpreted the ECB's two-pillar framework as separate approaches to forecast and analyse inflation at different time horizons or frequency bands. The ECB has publicly supported this understanding of the framework. This paper presents further evidence on the...