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In the aftermath of the 2000-2001 crisis in Turkey, the banking sector was in turbulence, requiring immediate action. The rescue operation significantly increased the public debt ratio with respect to gross domestic product. At the beginning of 2002, the central bank of Turkey announced that it...
Persistent link: https://www.econbiz.de/10005818597
We provide a simple theory of inflation inertia in a staggered price setting framework a la Calvo (1983). Contrary to Calvo's formulation, the frequency of price changes is allowed to vary according to an evolutionary criterion. Inertia is the direct result of gradual adjustment in this...
Persistent link: https://www.econbiz.de/10005557720
This paper presents an estimated model with learning and provides evidence that learning can improve the fit of popular monetary DSGE models and endogenously generate realistic levels of persistence. The paper starts with an agnostic view, developing a model that nests learning and some of the...
Persistent link: https://www.econbiz.de/10005561139
Monetary policy is sometimes formulated in terms of a target level of inflation, a fixed time horizon and a constant interest rate that is anticipated to achieve the target at the specified horizon. These requirements lead to constant interest rate (CIR) instrument rules. Using the standard New...
Persistent link: https://www.econbiz.de/10005784819
Monetary policy is sometimes formulated in terms of a target level of inflation, a fixed time horizon and a constant interest rate that is anticipated to achieve the target at the specified horizon. These requirements lead to constant interest rate (CIR) instrument rules. Using the standard New...
Persistent link: https://www.econbiz.de/10005791491
Recent evidence by Bils and Klenow (2004) and Klenow and Kryvstov (2003) shows that the average price duration for US CPI-basket goods is in the order of one to two quarters, challenging the monetary business cycle research to try and explain how short price durations can nevertheless generate a...
Persistent link: https://www.econbiz.de/10005706265
This paper characterizes the optimal inflation buffer consistent with a zero lower bound on nominal interest rates in a New Keynesian sticky-price model. It is shown that a purely forward-looking version of the model that abstracts from inflation inertia would significantly underestimate the...
Persistent link: https://www.econbiz.de/10005706291
Monetary policy is sometimes formulated in terms of a target level of inflation, a fixed time horizon and a constant interest rate that is anticipated to achieve the target at the specified horizon. These requirements lead to constant interest rate (CIR) instrument rules. Using the standard New...
Persistent link: https://www.econbiz.de/10005706535
This paper formulates and estimates a three-shock US business cycle model. The estimated model accounts for a substantial fraction of the cyclical variation in output and is consistent with the observed inertia in inflation. This is true even though firms in the model reoptimize prices on...
Persistent link: https://www.econbiz.de/10008516663
We analyze implications of in.ation persistence for business cycle dynamics following terms of trade and risk-premium shocks in a small open economy, under fixed and flexible exchange rate regimes. We show that the country's adjustment paths are slow and cyclical if there is a signi.cant...
Persistent link: https://www.econbiz.de/10005694998