In this paper, we consider a model where producers set their prices based on their prediction of the aggregated price level and an exogenous variable, which can be a demand or a cost-push shock. To form their expectations, they use OLS-type econometric learning with bounded memory. We show that...

We investigate the role of exchange rates in inflation-targeting emerging economies. We give strong evidence that hybrid inflation-targeting frameworks, where exchange rate is managed, deliver a stronger nominal anchor, as they show better resistance to the 2007–2008 inflation shock.

In a recent paper, Adão et al. (2011), using a cash-in-advance framework, derive an interest rate rule that results in a unique monetary equilibrium. The resulting interest rate rule is forward looking and the interest rate responds positively to forecasts of future real activity and to...

I determine expected long-run inflation in a two-state New Keynesian model driven by natural interest-rate uncertainty. Monetary policy switches between discretion in ‘normal times’ and zero-lower-bound episodes when it is passive. Long-run US inflation ranges from −1.8% to +1.2% p.a.

If long-term inflation expectations are well-anchored, they should be unaffected by short-term economic news. This letter introduces news-regressions with multiple endogenous breaks to investigate the de- and re-anchoring of US inflation expectations. We confirm earlier evidence on the...

We state that long-run restrictions that identify structural shocks in VAR models with unit roots lose their original interpretation if the fractional integration order of the affected variable is below one. For such fractionally integrated models we consider a medium-run approach that employs...

We find that short rates are more nonstationary than longer rates and that differences in conditional volatility exist between different maturities. Therefore, their dynamics may be both maturity specific and country specific, and any a priori generalizing assumptions may be misleading.

The behavior of impulse response coefficients as persistence measures is discussed under fractional integration. Results for long memory processes are extended to the antipersistent case of short memory.