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This paper examines the performance of forecast-based nonlinear Taylor rules in a class of simple microfunded models. The paper shows that even if the policy rule leads to a locally determinate (and stable) inflation target, there exist other learnable 'global' equilibria such as cycles and...
Persistent link: https://www.econbiz.de/10010283458
Borders have a sizable negative impact on trade flows. Given the vast number of individual goods potentially traded, this border effect could have two possible explanations: (1) less international than domestic trade in the goods that are actually traded between countries (flow), or (2)...
Persistent link: https://www.econbiz.de/10010283459
Many structural break and regime-switching models have been used with macroeconomic and financial data. In this paper, we develop an extremely flexible parametric model that accommodates virtually any of these specifications—and does so in a simple way that allows for straightforward Bayesian...
Persistent link: https://www.econbiz.de/10010283474
disparity between theory and practice concerning optimal monetary policy; these models suggest that the Friedman rule may not be …
Persistent link: https://www.econbiz.de/10010283475
Since Friedman (1953), an advantage often attributed to flexible exchange rate regimes over fixed regimes is their ability to insulate more effectively the economy against real shocks. I use a post-Bretton Woods sample (1973-96) of seventy-five developing countries to assess whether the...
Persistent link: https://www.econbiz.de/10010283477
This paper provides a baseline general-equilibrium model of optimal monetary policy among interdependent economies with monopolistic firms that set prices one period in advance. Strict adherence to inward-looking policy objectives such as the stabilization of domestic output cannot be optimal...
Persistent link: https://www.econbiz.de/10010283479
In this paper, I provide evidence that currency stop-loss orders contribute to rapid, self-reinforcing price movements, or price cascades. Stop-loss orders, which instruct a dealer to buy (sell) a certain amount of currency at the market rate once the rate has risen (fallen) to a prespecified...
Persistent link: https://www.econbiz.de/10010283486
A currency area can be a self-validating optimal policy regime, even when monetary unification does not foster real economic integration and intra-industry trade. In our model, firms choose the optimal degree of exchange rate pass-through to export prices while accounting for expected monetary...
Persistent link: https://www.econbiz.de/10010283487
We examine incentives for network-specific investment and the implications for network governance. We model an environment in which participants that make payments over a network can invest in a technology that reduces the marginal cost of using the network. A network effect results in multiple...
Persistent link: https://www.econbiz.de/10010283488
In this paper, I consider the policy implications of two alternative structural interpretations of observed inflation persistence, which correspond to two alternative specifications of the new Keynesian Phillips curve (NKPC). The first specification allows for some degree of intrinsic...
Persistent link: https://www.econbiz.de/10010283489