The purpose of this paper is to reexamine empirically the relationship between long-term interest rates in well integrated ?nancial markets. The analysis focuses on long-term interest rates in the US and Germany and has been carried out within the framework of a ?ve dimensional VAR for the...

This paper addresses cointegration in small cross-sectional panel data models. In addition to dealing with cointegrating relationships within the cross-sectional dimension, the paper explicitly addresses the issue of cointegration between cross-sections. The approach is based upon a well-known...

The 'saving for a rainy day' hypothesis implies that households' saving decisions reflect that they can (rationally) predict future income declines. The empirical relevance of this hypothesis plays a key role in discussions of fiscal policy multipliers and it holds under the null that the...

Does a "one model fits all" approach apply to the econometric modeling of regional house price determination? To answer this question, we utilize a panel of 100 US Metropolitan Statistical Areas over the period 1980q1-2010q2. For each area we estimate a separate cointegrated VAR model, focusing...

We use Bayesian methods to estimate the preferences of the US Federal Reserve by assuming that monetary policy is performed optimally under commitment since the mid-sixties. For this purpose, we distinguish between three subperiods, i.e. the pre-Volcker, the Volcker-Greenspan and the Greenspan...

We derive the optimal monetary policy in a sticky price model when private agents follow adaptive learning. We show that this slight departure from rationality has important implications for policy design. The central bank faces a new intertemporal trade-off, not present under rational...

Monetary policy works mainly through private agents' expectations. How precisely future policy intentions are communicated has, according to theory, implications for the outcome of monetary policy. Norges Bank has gone further than most other central banks in communicating its policy intentions....

Svensson (2004) suggested that a monetary policy committee of a central bank (MPC) should “find an instrument-rate path such that projections of inflation and output gap ‘look good’.” Academic literature on monetary policy gives guidance as to what the words “look good” means....

We estimate a small open-economy DSGE model for Norway with two specifications of monetary policy: a simple instrument rule and optimal policy based on an intertemporal loss function. The empirical fit of the model with optimal policy is as good as the model with a simple rule. This result is...