This paper presents a model in which some goods trade in "customer markets." In these markets, advertising plays a critical role in facilitating long-lived relationships. We estimate both policy and non-policy parameters of the model (which includes New-Keynesian frictions) on U.S. data,...

This paper develops an affine model of the term structure of interest rates in which bond yields are driven by observable and unobservable macroeconomic factors. It imposes restrictions to identify the effects of monetary policy and other structural disturbances on output, inflation, and...

Over the last twenty-five years, a set of influential studies has placed interest rates at the heart of analyses that interpret and evaluate monetary policies. In light of this work, the Federal Reserve’s recent policy of "quantitative easing," with its goal of affecting the supply of liquid...

In the United States, eradication of persistent federal deficits has won broad bipartisan support. At the same time, political pressures have mounted to strengthen the Federal Reserve's explicit concern with price stability. Proposals under consideration would require a much narrower focus on...

We revisit Obstfeld and Rogoff's (1995) results on exchange rate dynamics in a two-country, monetary model with incomplete asset markets, stationary net foreign assets, and endogenous nominal interest rate setting a la Taylor (1993). Under flexible prices, the nominal exchange rate exhibits a...

In this paper we re-examine commercial banks' lending behavior taking into account changes in the stance of monetary policy in conjunction with changes in financial sector uncertainty. Using a very large data set covering all banks in the US between 1986-2000, we show that financial uncertainty...

We analyse the impact of financial liberalisation on the link between monetary policy and house prices. We present a simple model of a small open economy subject to credit constraints. The model shows that the higher the degree of financial liberalisation, the stronger is the impact of interest...

A structural vector autoregressive approach identifies the main macroeconomic factors behind fluctuations in house prices in France, Germany, Italy, Spain, Sweden and the UK. Quarterly GDP, house prices, money, inflation and interest rates are characterised by a multivariate process driven by...

This paper presents a model in which "instrument uncertainty"-that is, an uncertain mapping from monetary policy to macroeconomic outcomes-may mitigate the inflationary bias problem that arises when efficient monetary policy rules are time- inconsistent. If the relation between monetary policy...

A number of previous studies have questioned the dominant role of Germany within the EMS. These conclusions are often based on empirical findings that interest rates of member countries of the EMS are not affected by German interest rates, even in the long run. In this study we establish...