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...

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...

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...

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...

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...

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...

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.

This study examines the Federal Reserve and private forecast accuracy of housing starts. We show that the Federal Reserve (private) forecasts are (generally) unbiased and superior to the random walk benchmark. At the shorter horizon, the Federal Reserve and private forecasts embody distinct...

It is well known that a high degree of relative risk aversion induces equilibrium indeterminacy in cash-in-advance economies. I find that by endogenously adjusting the nominal money supply to output fluctuations, these equilibria can be effectively eliminated.