This paper argues that a specification of stochastic volatility commonly used to analyze the Great Moderation in DSGE models may not be appropriate, because the level of a process with this specification does not have conditional or unconditional moments. This is unfortunate because agents may...

We examine a two-sector real business cycle model with sector-specifc ex-ternalities in the production of distinct consumption and investment goods. In addition, the household utility is postulated to exhibit no income effect on the demand for leisure. Unlike in the one-sector counterpart, we...

In this paper, we examine the effects of data collection frequency on the computation of the Consumer Price Index (CPI). Using stochastic simulation techniques, we conclude that the frequency of data collection has a considerable effect on CPI values. Our findings confirm the need for high...

While consumption habits have been utilised as a means of generating a humpshaped output response to monetary policy shocks in sticky-price New Keynesian economies, there is relatively little analysis of the impact of habits (particularly, external habits) on optimal policy. In this paper we...

This paper studies the proposition that an inflation bias can arise in a setup where a central banker with asymmetric preferences targets the natural unemloyment rate.

This paper studies a dynamic-optimizing model of a semi-small open economy with sticky nominal prices and wages. The model exhibits exchange rate overshooting in response to money supply shocks. The predicted variability of nominal and real exchange rates is roughly consistent with that of G7...

This paper studies the proposition that an inflation bias can arise in a setup where a central banker with asymmetric preferences targets the natural unemployment rate. Preferences are asymmetric in the sense that positive unemployment deviations from the natural rate are weighted more (or less)...

For policy makers and business cycles analysts is important to count on variables that anticipate points of inflection in economic activity. This paper studies aggregate real money balances as leader indicator of the economic activity based on a Probit mo

This paper compares two alternative theories of Aggregate supply, both with a "New Keynesian Flavor". The first assumes that prices are rigis due to the existence of menu costs of the kind advanced by Mankiw [38] and Akerlof and Yellen [2]. The second derives price stickiness endogenously as one...

Using annual US data for gross domestic product originating by sector between 1947 and 1997 it is shown that a negative long-run relationship between inflation and the markup is present across the sectors as well as in the aggregate. A preliminary explanation based on indutry structure is...