This paper looks at some implications of data uncertainty for monetary policy. We combine national accounts data revisions with optimal control and filtering experiments on a calibrated model to discuss policy implications of price-versus-volume data uncertainty in GDP data for the United...

The effectiveness of a central bank’s monetary policymaking is determined by the merit of its policy actions and their perceived credibility. Since the 1990s central banks have placed more emphasis on clear communications and transparency as additional levers to help achieve their goals. In...

Using a model of island economy where financial markets aggregate dispersed information of the public, we analyze how two-way communication between the central bank and the public affects inflation dynamics. When inflation target is observable and credible to the public, markets provide the bank...

We study the equilibrium properties of a business cycle model with financial frictions and price adjustment costs. Capital-constrained entrepreneurs finance risky projects by borrowing from banks. Banks, in turn, make loans using equity and deposits. Because financial contracts are not...

We analyze an estimated stochastic general equilibrium model that replicates key macroeconomic and financial stylized facts during the Great Moderation of 1983-2007. Our model predicts a sizeable and volatile nominal term premium - comparable to recent reduced-form empirical estimates - with...

We document that expansionary monetary policy shocks are less effective at stimulating output and investment in periods of high volatility compared to periods of low volatility, using a regime-switching vector autoregression. The lower effectiveness of monetary policy can be linked to weaker...

Well-anchored inflation expectations should not react to short-term oriented macroeconomic news. This paper analyzes the dynamic response of inflation expectations to macro news shocks in a structural VAR model. As identification of structural macro news shocks is controversial, we use a proxy...

We build a two-country version of the model in Gali & Monacelli (2005), which extends for a small open economy the new Keynesain DSGE model used as tool for monetary policy analysis in closed economies. A distinctive feature of the model is that the terms of trade enters directly into the new...