To what extent is the international business cycle affected by the fact that an essential input (oil) is traded on the world market? We quantify the contribution of oil by setting up a model with separate shocks to efficiencies of capital/labor and oil, as well as global shocks to the oil...

We identify an inflationary technology news shock as the leading source of business cycle variations for the postwar U.S. economy. This shock acts like a demand shock: it induces strong positive comovement in real quantities - GDP, consumption, investment - and weak positive comovement between...

This paper examines the effects of expenditure-based fiscal consolidation when credibility as to whether the cuts will be long-lasting is imperfect. We contrast the impact limited credibility has when the consolidating country has the means to tailor monetary policy to its own needs, with the...

This paper investigates the performance of various monetary rules in an open economy with incomplete exchange rate pass-through. Implementing monetary policy through an exchange rate augmented policy rule does not improve social welfare compared to using an optimized Taylor rule, irrespective of...

This paper analyzes the central bank s optimal objective function in a small open economy model allowing for incomplete exchange rate pass-through. The results indicate that there are welfare gains from different types of monetary policy inertia. The welfare improvements of exchange rate...

We develop a structural model of a small open economy with gradual exchange rate pass-through and endogenous inertia in inflation and output. We then estimate the model by matching the implied impulse responses with those obtained from a VAR model estimated on Swedish data. Although our model is...

The central bank's optimal reaction to foreign and domestic shocks is analyzed in an inflation targeting model allowing for incomplete exchange rate pass-through. Limited pass-through is incorporated through nominal rigidities in an aggregate supply-aggregate demand model derived from some...

We study the fluctuations of exchange rates and consumer prices in two small open economies, Sweden and Canada, using a structural Bayesian VAR. Four domestic and two global shocks are identified through zero and sign restrictions. For both economies, we find that the main driver of consumer...

The Swedish economy is strongly dependent on global economic developments, which is re ected in generally strong empirical relationships between Swedish and foreign macroeconomic variables. It is, however, diffi cult for standard open-economy dynamic stochastic general equilibrium (DSGE) models...

The pass-through from exchange rate changes to inflation differs depending on the underlying shock. This paper quantifies the conditional exchange rate pass-through (CERPT) to prices, i.e. the change in prices relative to that in the exchange rate following a certain exogenous shock, with a...