This paper asks to what extent the market prices in the future monetary policy decisions of the Czech National Bank (CNB), how this policy predictability has evolved over time, and whether the change in the central bank’s forecasting methodology in mid-2002 had any impact. Using a sample up to...

Using a stochastic discount factor approach, we derive the exact solution for arbitrage-free bond yields for the case that the short-term interest rate follows a threshold process with the intercept switching endogenously. The yield functions, mapping the one-month rate into n-period yields,...

We investigate the effect of fiscal institutions such as the strength of the finance minister in the budget process and deficits on interest spreads contained in bond yields of the countries now belonging to the Eurozone. Deficits significantly increase risk premia measured by relative swap...

Macroeconomic Policies of the Economic and Monetary Union: Theoretical Underpinnings and Challenges Philip Arestis and Malcolm Sawyer, The Levy Economics Institute and Leeds University Abstract This paper presents two issues: first, an effort to decipher the type of economic analysis and...

This paper describes the Federal Reserve's analytical framework under Volcker and Greenspan, as it was constructed in the early 1980s, during a period of high inflation. It traces the modeling and policy implications of this framework. It discusses the Fed's actual track record and the state of...

Using an optimisation-based model with endogenous labour supply and a proportional tax rate, we compare the stabilising properties of different fiscal policy rules. The economy is affected by shocks from both government spending and technology. The fiscal policy rule can be based on government...

Using a simple single-equation approach, many studies have shown that the term structure of interest rates or its approximation – the term spread is a potentially useful indicator of future inflation and/or future real economic activity. We argue that these results may be biased due to the...

In this paper we introduce an application of the supply-side channel for fiscal policy to the basic New Keynesian model. We use a proportional tax rate instead of lump sum tax and introduce the distortions of a tax wedge. We derive a closed economy forward-looking model with government...

In this paper we consider inflation and government debt dynamics when monetary policy employs a global interest rate rule and private agents’ forecasts using adaptive learning. Because of the zero lower bound on interest rates, active interest rate rules are known to imply the existence of a...