In this paper we quantitatively evaluate the hypothesis that the Great Moderation is partly the result of a less activist monetary policy. We simulate a New Keynesian model where the central bank can only observe a noisy estimate of the output gap and fnd that the less pronounced reaction of the...

Sudden, asymmetric shifts in investor sentiment known as 'flights-to-safety' typically emanate from center economies but propagate globally. In the absence of policy intervention, these financial shocks can spill over and destabilize macroeconomic conditions in many countries. This paper...