Money illusion is "frequently invoked and frequently resisted" by economists. Resisted as it contradicts the maximizing paradigm of microeconomic theory and invoked since a tendency to think in nominal rather than real terms becomes evident in the behavior of agents. This paper rationalizes...

We quantify spillovers of inflation expectations between the United States (US) and Euro Area (EA) based on break-even inflation (BEI) rates. In contrast to previous studies, we model US and EA BEI rates jointly in a structural vector autoregressive (SVAR) model. The SVAR approach allows to...

Commodity price fluctuations in recent years have led to wide swings in inflationary pressures across Asian emerging market economies and have revived the discussion on how monetary policy should best react. We argue that the conventional wisdom for emerging market economies of treating...

To what extent are US and Euro Area (EA) inflation expectations determined by foreign shocks? How do transmissions change during the great recession and European sovereign debt crisis? We address these questions with a flexible structural VAR model of weekly financial markets’ inflation...

Money illusion is frequently invoked and frequently resisted by economists. Resisted as it contradicts the maximizing paradigm of microeconomic theory and invoked since a tendency to think in nominal rather than real terms becomes evident in the behavior of agents. This paper rationalizes money...

We analyze the importance of global shocks for the global economy and national policy makers. More specifically, we investigate whether monetary policy has become less effective in the wake of financial globalization. We also examine whether there is increasing uncertainty for central banks due...

We analyze the importance of global shocks for the global economy and national policy makers. More specifically, we investigate whether monetary policy has become less effective in the wake of financial globalization. We also examine whether there is increasing uncertainty for central banks due...

The 2007-09 price shocks affected in particular the prices of food commodities and fuel. As a consequence, Mozambique experienced reduced exports, more expensive imports and increased food and oil prices, contributing to the stagnant poverty rates registered in 2008/9. Our analysis finds, first,...

We analyze the importance of global shocks for the global economy and national policy makers. More specifically, we investigate whether monetary policy has become less effective in the wake of financial globalization. We also examine whether there is increasing uncertainty for central banks due...

We confront the notion that flexible rates insulate a country from external disturbances with new evidence on spillovers from euro-area shocks to neighboring countries. We find that in response to euro-area shocks, spillovers are not smaller, and currency movements not significantly larger, in...