This paper estimates NAIRU (Non-Accelerating Inflation Rate of Unemployment) for the Turkish economy as an unobserved stochastic variable by systems approach. Based on a Phillips curve equation combined with an Okun law for output gap and unemployment gap, the systems approach imposes stochastic...

This paper re-examines the VAR analysis of the price puzzle with regard to the issues of measurement, identification and misspecification. In an empirical analysis conducted for the US economy, we consider alternative measures of economic activity and inflation, alternative assumptions to...

The pre-crisis monetary policy consensus has been challenged on a number of fronts. Even the nominal target, around which the modern consensus developed, has been called into question, with a vigorous recent debate ensuing about nominal income targeting as an alternative. This paper contributes...

I characterize optimal monetary and fiscal policy in a stochastic New Keynesian model when nominal interest rates may occasionally hit the zero lower bound. The benevolent policymaker controls the short-term nominal interest rate and the level of government spending. Under discretionary policy,...

This paper presents a new mechanism through which monetary policy rules affect inflation persistence. When assuming that price reset hazard functions are not constant, backward-looking dynamics emerge in the NKPC. This new mechanism makes the traditional demand channel of monetary transmission...

We investigate optimal horizons for targeting inflation in response to different shocks and their properties under alternative preferences of an inflation-targeting central bank. Our analysis is based on a well specified macroeconometric model of Norway, but we examine how alternative...

The interest in empirical studies of monetary policy has increased in the last decade. The deregulation of financial markets and the increased use of explicit policy rules and targets have made monetary policy more transparent and interesting for economic analysis. This paper demonstrates how a...

The conventional view is that a monetary policy shock has both supply-side and demand-side effects, at least in the short run. Barth and Ramey (2001) show that the supply-side effect of a monetary policy shock may be greater than the demand-side effect. We argue that it is crucial for monetary...

Recent empirical literature documents that unexpected changes in the nominal interest rates have a significant effect on stock prices: a 25-basis point increase in the Fed funds rate is associated with an immediate decrease in broad stock indices that may range from 0.5 to 2.3 percent, followed...