In this Paper we present an overview of a number of issues relating to the equilibrium exchange rates of the new EU member states from Central and Eastern Europe. In particular, we present a critical overview of the various methods available for calculating equilibrium exchange rates and discuss...

This Paper sets out to analyse the ever-growing literature on equilibrium exchange rates in the new EU member states of Central and Eastern Europe in a quantitative manner using meta-regression analysis. We study the extent to which the estimated real misalignments reported in the literature...

Historical estimates of the Fisher effect and the informational content in the yield curve may not be relevant after a change in monetary policy. This paper uses a small dynamic rational expectations model with staggered price setting to study how central bank preferences (and thereby monetary...

This paper develops a model of the costliness of inflation that places the locus of costs in the bond market, rather than the money market. It argues that inflation is costly on account on the contraction of the bond market caused by the riskiness of inflation. The theory is premised upon the...

The paper establishes that sovereigns, like banks, need a lender of last resort (LoLR). In the euro area the ECB, with its estimated €3.4 trillion non-inflationary loss absorption capacity, is the only credible sovereign LoLR. The ECB/Eurosystem has been acting as sovereign LoLR through its...

Forward interest rates have become popular indicators of inflation expectations. The usefulness of this indicator depends on the relative volatility and the correlation of inflation expectations and expected real interest rates. This paper studies US and UK data, using a range of different tools...

Modern neo-Keynesian, new classical, and real business cycle models typically differ in the degree to which they incorporate long-run or short-run neutrality propositions. Despite their importance, little firm international evidence on the validity of these neutrality hypotheses is available to...

A measure of the credibility of monetary policy is the inflation risk premium embodied in nominal yields. This will be time varying and can be estimated by combining the information contained in the nominal term structure of interest rates with that in the real term structure of...

A long-standing area of research and policy interest has been the construction of a measure of monetary policy stance. One measure that has been proposed—as an alternative to indices that employ monetary aggregates or exchange rates—is the spread between the actual real interest rate and its...

Asset price inflation presents central banks with a puzzle. I examine the case of Germany, 1925-7, when the Reichsbank intervened to bring down stock prices, rectify imbalances and curb speculation. Present value relations, comparisons with historical valuation measures and the time-series...