This paper examines the linear and nonlinear causal relationships between commodity price indices and macroeconomic variables such as the consumer price index (CPI) and the industrial production index (IP) in the Euro zone. We use monthly time series data from January 1999 to December 2011 and...

Monetary policy design in currency unions faces more challenging scenarios like the presence of asymmetric shocks and the higher probability of time inconsistency. An evaluation of the union welfare under a monetary rule and under discretion in these circumstances is carried out. Assuming that...

This paper studies how introducing habit formation to the two-sector small open economy model of Obstfeld and Rogoff (1995) and Lane (1997) affects the impact of a monetary surprise on welfare. In this model with endogenous habit formation, we examine agents' responses to a monetary expansion...

This research reviews the effects of fiscal expenditures on economic output in a non-linear fashion for the Barbados economy. Using the Markov-Switching methodology, fiscal expenditure multipliers are estimated for each stage of the business cycle. The data indicates that a three-regime model is...

After experiencing high and persistent inflation for more than two decades, Turkey is entering a period of single-digit inflation again. Following a summary of the macroeconomic developments occurred since the early 1970s, this paper attempts to survey the empirical literature both on the...

A factor-augmented vector autoregressive (FAVAR) model is applied to determine the effects of a rise in US government expenditure on the United States and Canadian economies. The results obtained reasonably characterize the effect of a rise in US government spending to the United States and...

After experiencing high and persistent inflation for more than two decades, Turkey is entering a period of single-digit inflation again. Following a summary of the macroeconomic developments occurred since the early 1970s, this paper attempts to survey the empirical literature both on the...

Despite widespread recognition that credibility is an important determinant of inflation persistence, surprisingly little empirical evidence exists to support this hypothesis. We investigate this hypothesis using data for US and UK. Our results suggest that the degree of inflation persistence is...

A large literature lauds the benefits of central bank transparency and credibility, but when a central bank like the U.S. Federal Reserve has a dual mandate, is not specific to the extent it targets employment versus price stability, and is not specific to the magnitude interest rates should...

This note shows that full price indexation is not optimal in the long-run, in the New Keynesian model under trend inflation and price staggering à la Calvo. Moreover, we show that more price stickiness may increase steady state welfare, if price indexation is partial.