This letter evaluates forecasts from probit models that use the slope of the yield curve to forecast recessions. These models give reliable non-probabilistic warnings of recessions, but the estimated probabilities do not match the conditional frequency of recession months.

We study interest rate rules responding to stock prices in a sticky-price sticky-wage New-Keynesian framework subject to consumption externalities. For given wage rigidity, such rules are beneficial to equilibrium determinacy if households’ preferences feature sufficiently strong...

This study shows that the private sector accurately predicts short-term interest rate targets set by the Brazilian monetary authorities. With increased transparency under inflation targeting, such evidence suggests that the public perceives the central bank as credible.

In this note, we quantify the deterioration of achievable stabilization outcomes when monetary policy operates under imperfect credibility and weak anchoring of long-term expectations. Within a medium-scale Dynamic Stochastic General Equilibrium (DSGE) model, we introduce, through a simple...

Under reduced-form learning, agents are endowed with an aggregate model, and rational expectations are then replaced with subjective expectations. This paper demonstrates that the reduced-form learning approach may be arbitrary in that a particular representation of aggregate dynamics has...

A weight-conservative central banker setting policy with discretion and stabilizing the real exchange-rate-adjusted (REX) price level and the output gap can replicate the behavior of the rate of REX inflation and the output gap under policy from a timeless perspective.

Amid its rapidly increasing usage and immense public interest the subject of Bitcoin has raised profound economic and societal issues. In this paper we undertake economic and econometric modelling of Bitcoin prices. As with many asset classes we show that Bitcoin exhibits speculative bubbles....

We reassess the relationship between money and output using quarterly data from the US economy. We use several tools based on wavelets, the wavelet power transform and the wavelet coherence with which we analyze this relationship in both time and frequency. We find evidence of a weaker...

We suggest a new unit-root test with a Fourier function in the deterministic term in a Dickey–Fuller type regression framework. Our suggested test can complement the Fourier LM and DF-GLS unit root tests. They have good size and power properties.

We investigate the effects of predictable changes in TFP at the sectoral level. Our findings can reconcile the seemingly contradictory findings in the literature. Shocks to predictable changes in investment-sector TFP are also found important for US business cycle fluctuations.