Several recent studies imply that the response of national saving to fiscal policy is non-monotonic. In this paper, we use two data sets to search for the circumstances in which such non-monotonic responses arise: one refers to a sample of OECD countries, as in previous studies, and one to a...

Non-coordinated monetary policy is analysed in a stochastic two-country general equilibrium model. Non-coordinated equilibria are compared in two cases: one where policy is set in terms of state-contingent money supply rules, and one where policy is set in terms of state-contingent nominal...

Nowadays a considerable amount of information on the behaviour of the economy is readily available, in the form of large datasets of macroeconomic variables. Central bankers can be expected to base their decisions on this very large information set. Yet the academic profession has shown a clear...

This paper is an attempt to provide an updated assessment of what we know and what do not know about the impact of monetary policy on the economy and what implications follow for the conduct of monetary policy in today's world. Firstly, we discuss the conditions under which monetary policy can...

The complexity resulting from intertwined uncertainties regarding model misspecification and mismeasurement of the state of the economy defines the monetary policy landscape. Using the euro area as laboratory this paper explores the design of robust policy guides aiming to maintain stability in...

This Paper considers the implications of incomplete exchange rate pass-through for optimal monetary and exchange rate policy. A two-country model is presented which allows an explicit derivation of welfare functions in terms of a weighted sum of the second moments of producer prices and the...

A small open economy model is presented, which allows explicit treatment of uncertainty and its effects on macroeconomic behaviour. Inflation targeting is compared to the welfare maximizing monetary rule and to a fixed nominal exchange rate. It is found that flexible inflation targeting produces...

We examine optimal policy in a two-country model with uncertainty and learning, where monetary policy actions affect the real economy through the real exchange rate channel. Our results show that whether policy should be cautious or activist depends on the size of one country relative to...

In the aftermath of the global financial crisis, the state of macroeconomic modeling and the use of macroeconomic models in policy analysis has come under heavy criticism. Macroeconomists in academia and policy institutions have been blamed for relying too much on a particular class of...

The U.S. dollar holds a dominant place in the invoicing of international trade, along two complementary dimensions. First, most U.S. exports and imports invoiced in dollars. Second, trade flows that do not involve the United States are also substantially invoiced in dollars, an aspect that has...