In this paper, we examine the ability of Fisher effect to describe the subjective behaviour of monetary policy responses for nations constrained by global factors. We developed and estimated a simple DSGE model for appraising the consequence of an integrated financial market predictor on...

This paper uses an estimated open economy DSGE model to examine if constant interest forecasts one and two years ahead can be regarded as modest policy interventions during the period 1993Q4-2002Q4. An intervention is here defined to be modest if it does not trigger the agents to revise their...

Recent studies document the deteriorating performance of forecasting models during the Great Moderation, which conversely implies that forecastability was higher in the preceding era when the economy was unexpectedly volatile. We explain this phenomenon in the context of equilibrium...

This paper contributes to the debate of whether central banks can \lean against the wind" of emerging stock or house price bubbles. Against this background, the paper evaluates if new advances in real-time bubble detection, as brought forward by Phillips et al. (2011), can timely detect bubble...

This chapter aims to provide a hands-on approach to New Keynesian models and their uses for macroeconomic policy analysis. It starts by reviewing the origins of the New Keynesian approach, the key model ingredients and representative models. Building blocks of current-generation dynamic...

We calibrate a standard New Keynesian model with three alternative representations of monetary policy- an optimal timeless rule, a Taylor rule and another with interest rate smoothing- with the aim of testing which if any can match the data according to the method of indirect inference. We find...

This paper presents a new solution method for dynamic equilibrium models. The proposed method approximates the solution by polynomials that zero the residual function and its derivatives at a given point x0. It is essentially a projection-type algorithm, but is significantly faster than standard...

This chapter aims to provide a hands-on approach to New Keynesian models and their uses for macroeconomic policy analysis. It starts by reviewing the origins of the New Keynesian approach, the key model ingredients and representative models. Building blocks of current-generation dynamic...

This paper analyses the theoretical and policy implications of assuming firm-specific lumpy investment behaviour by firms and compares such implications to those occurring when adopting different investment specifications in a new-Keynesian framework. We develop numerical simulations of the...