This paper addresses the output-price volatility puzzle by studying the interaction of optimal monetary policy and … processing rate. Although a decline of policy activism directly increases output volatility, it indirectly anchors expectations …, which decreases output volatility. If the indirect effect dominates then the usual trade-off between output and price …

– the BOI’s USD purchases have widened the negative deviation from covered interest parity. The higher moments of the risk … unaffected. The USD purchases simply shift the whole distribution towards higher USD/ILS values. Crash risk, for instance, is …

In this paper, we construct alternative theoretical models for exchange rates by introducing additional risk factors …, based on the volatility of macroeconomic fundamentals. The modified flexible-price monetary model is used to characterize … macroeconomic sources of FOREX risk may be a missing factor in the exchange rate study. …