We analyze the role of house prices in the monetary policy transmission mechanism in the U.S. using structural VARs. The VAR is identified using a combination of short-run and long-run (neutrality) restrictions, allowing for a contemporaneous interaction between monetary policy and various asset...

We analyse the role of house prices in the monetary policy transmission mechanism in Norway, Sweden and the UK using structural VARs. A solution is proposed to the endogeneity problem of identifying hocks to interest rates and house prices by using a combination of short-run and long-run...

Dornbusch's exchange rate overshooting hypothesis is a central building block in international macroeconomics. Yet, empirical studies of monetary policy have typically found exchange rate effects that are inconsistent with overshooting. This puzzling result has been viewed by some researchers as...

Do central banks respond to exchange rate movements? According to Lubik and Schorfheide (2007) who estimate structural general equilibrium models with monetary policy rules, the answer is "Yes, some do". However, their analysis is based on a sample with multiple regime changes, which may bias...

In open economy, a choice can be made between two measures of inflation for use as a target variable: CPI inflation or domestic inflation.This paper considers flexible and strict inflation targeting strategies and explores the circumstances under which a domestic inflation target is preferred to...

The paper presents a structural model framework for a small open economy.The model, based on optimising households and firms, has been calibrated on Czech macroeconomic data in order to develop an analytic framework suitable for analysing key policy questions related to the Czech Republic s...

In this paper, we examine the incentives for central bank activism and caution in a two-country open-economy model with uncertainty and learning.We find that the presence of a strategic interaction between the home and foreign central banks creates an additional motivation for caution in...

We embed an expectations-based optimal policy rule into a DSGE model for a small open economy that is augmented with trend extrapolation or chartism, which is a form of technical trading, in currency trade to examine the prerequisites for monetary policy. We find that a unique REE that is...

In this essay we study the optimal noncoordinated fiscal policy in a monetary union, where a common and independent monetary authority commits to optimally set the union-wide nominal interest rate. The national governments in the monetary union implement independent fiscal policies by choosing...

The paper estimates McCallum and Taylor monetary policy reaction functions, and hybrids mixing instruments and targets from the two frameworks, for 20 emerging market economies. McCallum-Taylor specifications with an interest rate instrument and a nominal income gap target perform better than...