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Structural vector autoregressions (VARs) are widely used to trace out the effect of monetary policy innovations on the economy. However, the sparse information sets typically used in these empirical models lead to at least two potential problems with the results. First, to the extent that...
Persistent link: https://www.econbiz.de/10005714376
We discuss the evolution in macroeconomic thought on the monetary policy transmission mechanism and present related empirical evidence. The core channels of policy transmission - the neoclassical links between short-term policy interest rates, other asset prices such as long-term interest rates,...
Persistent link: https://www.econbiz.de/10008634672
Do prices respond to macro shocks? Does the mere presence of international frontiers hinder trade? We revisit these questions by studying a dataset of online book prices for a number of US and Canadian retailers. We believe our dataset is well suited to this task for a number of reasons: (1)...
Persistent link: https://www.econbiz.de/10008634676
It has been argued that existing DSGE models cannot properly account for the evolution of key macroeconomic variables during and following the recent great recession. We challenge this argument by showing that a standard DSGE model with financial frictions available prior to the recent crisis...
Persistent link: https://www.econbiz.de/10011212816
We consider a simple variant of the standard real business cycle model in which shareholders hire a self-interested executive to manage the firm on their behalf. Delegation gives rise to a generic conflict of interest mediated by a convex (option-like) compensation contract which is able to...
Persistent link: https://www.econbiz.de/10005079164
This paper characterizes a robust optimal policy rule in a simple forward-looking model, when the policymaker faces uncertainty about model parameters and shock processes. We show that the robust optimal policy rule is likely to involve a stronger response of the interest rate to fluctuations in...
Persistent link: https://www.econbiz.de/10005084782
This paper proposes a general method for deriving an optimal monetary policy rule in the case of a dynamic linear rational-expectations model and a quadratic objective function for policy. A commitment to a rule of the type proposed results in a determinate equilibrium in which the responses to...
Persistent link: https://www.econbiz.de/10005714054
In this paper we calculate robustly optimal monetary policy rules for several variants of a simple optimizing model of the monetary transmission mechanism with sticky prices and/or wages. We discuss representations of optimal policy both in terms of interest-rate feedback rules that generalize...
Persistent link: https://www.econbiz.de/10005720376
This paper characterizes optimal monetary policy for a range of alternative economic models in terms of a flexible inflation targeting rule, with a target criterion that depends on the model specification. It shows which forecast horizons should matter, and which variables besides inflation...
Persistent link: https://www.econbiz.de/10005050125
This paper considers a general class of nonlinear rational-expectations models in which policymakers seek to maximize an objective function that may be household expected utility. We show how to derive a target criterion that is: (i) consistent with the model's structural equations, (ii) strong...
Persistent link: https://www.econbiz.de/10008631099