The bulk of literature on real rigidity attempts to identify sources of real rigidity in market imperfections while assuming that the money supply is exogenously set. This paper shows that monetary policy preferences affect the responsiveness of marginal cost to output and through this channel...

This paper argues that the parameters of monetary policy rules affect the persistence of inflation and output. Persistence is lower if monetary policy emphasises the price level or if there is an inflation target. A greater emphasis on output increases persistence. There is a simple New...

This paper argues that the adoption of an inflation target reduces the persistence of inflation.We develop the theoretical literature on inflation persistence by introducing a Taylor rule for monetary policy into a model of persistence and showing that inflation targets reduce inflation...

This paper estimates a variety of models of inflation using quarterly data for the UK between 1965 and 2001. We find strong evidence that the persistence of inflation is nonlinear and that inflation adjusted more rapidly in periods of macroeconomic stress such as the mid-1970s, the early 1980s...

This paper analyses a model of non-linear exchange rate adjustment that extends the literature by allowing asymmetric responses to over- and under-valuations. Applying the model to Greece and Turkey, we find that adjustment is asymmetric and that exchange rates depend on the sign as well as the...

This paper provides empirical evidence on the response of monetary policymakers to uncertainty. Using data for the UK since the introduction of inflation targets in October 1992, we find that the impact of inflation on interest rates is lower when inflation is more uncertain and is larger when...

This paper studies the dynamics of lending and deposit rates in two emerging markets in Latin America: Colombia and Mexico. The dynamics of lending (deposit) interest rates are driven by the exogenous interbank interest rate and deviations from the long-run lending-interbank (deposit-interbank)...

This paper provides further empirical results on the relationship between black market and official exchange rates in six emerging economies (Iran, India, Indonesia, Korea, Pakistan, and Thailand). First, it applies both time series techniques and heterogeneous panel methods to test for the...

This paper analyses the relationship between monetary policy and asset prices in the context of optimal policy rules. The transmission mechanism is represented by a linearized rational expectations model augmented for the effect of asset prices on aggregate demand. Stabilization objectives are...