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Risk, Monetary Policy and the Exchange Rate

Benigno, Gianluca - 2011

In this research, we provide new empirical evidence on the importance of time-varying uncertainty for the exchange rate … and the excess return in currency markets. Following an increase in monetary policy uncertainty, the dollar exchange rate … general-equilibrium theory of exchange rate determination based on the interaction between monetary policy and time …

Persistent link: https://www.econbiz.de/10013123697

International Portfolio Allocation Under Model Uncertainty

Benigno, Pierpaolo - 2010

an additional hedging motif driven by the interaction between real exchange rate risk and ambiguity aversion. What … matters is the long-run as opposed to the short-run risk. Domestic equity is a good hedge with respect to long-run real … exchange rate risk even when bonds are traded. The higher is the degree of ambiguity aversion, the stronger is the home bias …

Persistent link: https://www.econbiz.de/10012757854

Monetary Policy, Doubts and Asset Prices

Benigno, Pierpaolo - 2010

Asset prices and the equity premium might reflect doubts and pessimism. Introducing these features in an otherwise standard New-Keynesian model changes in a quite substantial way the nature of the policy that maximizes the welfare of the consumers in the model. First, following productivity...

Persistent link: https://www.econbiz.de/10013137729

New-Keynesian Economics : An As-Ad View

Benigno, Pierpaolo - 2010

A simple New-Keynesian model is set out with AS-AD graphical analysis. The model is consistent with modern central banking, which targets shortterm nominal interest rates instead of money supply aggregates. This simple framework enables us to analyze the economic impact of productivity or markup...

Persistent link: https://www.econbiz.de/10012757664

Portfolio Choices with Near Rational Agents : A Solution of Some International-Finance Puzzles

Benigno, Pierpaolo - 2010

A dynamic model of consumption and portfolio decisions is analyzed in which agents seek robust choices against some misspecification of the model probability distribution. This near-rational environment can at the same time explain an imperfect international portfolio diversification and break...

Persistent link: https://www.econbiz.de/10012760047

Dynamic Debt Deleveraging and Optimal Monetary Policy

Benigno, Pierpaolo - 2014

This paper studies optimal monetary policy under dynamic debt deleveraging once the zero bound is binding. Unlike the existing literature, the natural rate of interest is endogenous and depends on macroeconomic policy. Optimal monetary policy successfully raises the natural rate of interest by...

Persistent link: https://www.econbiz.de/10013046160

Optimal Monetary and Fiscal Policy : A Linear Quadratic Approach

Benigno, Pierpaolo; Woodford, Michael - 2021

We propose an integrated treatment of the problems of optimal monetary and fiscal policy, for an economy in which prices are sticky and the only available sources of government revenue are distorting taxes. Our linear-quadratic approach allows us to nest both conventional analyses of optimal...

Persistent link: https://www.econbiz.de/10013218299

Optimal Inflation Targeting Under Alternative Fiscal Regimes

Benigno, Pierpaolo; Woodford, Michael - 2021

Standard discussions of flexible inflation targeting as an optimal monetary policy abstract completely from the consequences of monetary policy for the government budget. But at least some of the countries now adopting inflation targeting have substantial difficulty in controlling fiscal...

Persistent link: https://www.econbiz.de/10013238733

Optimal Stabilization Policy When Wages and Prices are Sticky : The Case of a Distorted Steady State

Benigno, Pierpaolo; Woodford, Michael - 2021

Erceg et al. (2000) show that when both wages and prices are sticky, maximization of expected utility is equivalent to minimizing a loss function with three terms, involving measures of the variability of wage inflation, price inflation and the output gap respectively. Here we generalize their...

Persistent link: https://www.econbiz.de/10013247280

Inflation Stabilization and Welfare : The Case of a Distorted Steady State

Benigno, Pierpaolo; Woodford, Michael - 2021

This paper considers the appropriate stabilization objectives for monetary policy in a microfounded model with staggered price-setting. Rotemberg and Woodford (1997) and Woodford (2002) have shown that under certain conditions, a local approximation to the expected utility of the representative...

Persistent link: https://www.econbiz.de/10013247421