Uncovered interest parity combined with mean reversion in real exchange rates implies a positive correlation between the real interest rate differential and the level of the real exchange rate. Previous empirical work that has attempted to test for this relationship has found little empirical...

Using stochastic simulations and stability analysis, we compare the performances of different monetary rules in a moderately nonlinear model with those in a time-varying nonaccelerating-inflation rate-of-unemployment (NAIRU) model. Rules that perform well in linear models -- but implicitly...

This paper employs stochastic simulation techniques optimally to calibrate the parameters of some the simple monetary policy rules that have been proposed in the literature. The question of the robustness of these policy rules to model uncertainty is examined. Uncertainties about three elements...