In a simple open EME macromodel, calibrated to the typical institutions and shocks of a densely populated emerging market economy, a monetary stimulus preceding a temporary supply shock can lower interest rates, raise output, appreciate exchange rates, and lower inflation. Simulations generalize...

In an economy conducted under an Inflation Targeting regime, the output gap becomes one of the most important variables to guide monetary policy. Defined as the difference between observed and potential or non-inflationary output, the gap is a measure of the state of aggregate demand and,...

This paper considers optimal stabilization policy and nominal income targets for an open economy where the authorities are concerned both with unemployment and monetary instability. To fully achieve these two objectives the authorities must use both monetary and "supply-side" fiscal policy. It...

Previous studies of the sources of real exchange rate fluctuations have concluded that real demand shocks account for the bulk of the movements in real exchange rates. In this paper, bilateral real exchange rates between the US, the UK, Germany and Japan are investigated using a statistical...

This paper develops a theory of medium term share price movements under slow adjustment in the labour market relative to the share market and perfect foresight in the share market. The model seeks to explain the slow movements in real share prices that have been observed in the OECD countries...

The empirical test of the New Keynesian Phillips curve is often implemented by estimating a hybrid specification that includes both lagged and future inflation and then by examining whether the estimated coefficient on future inflation is significantly larger than the one on lagged inflation....

What shocks account for the business cycle frequency and long run movements of output and prices? This paper addresses this question using the identifying assumption that only supply shocks, such as shocks to technology, oil prices, and labor supply affect output in the long run. Real and...

Supply shocks played an important role in macroeconomic fluctuations during the 1970's. Supply shocks are also increasingly important in Keynesian and neo-classical models of the business cycle. This paper is a short survey of these theoretical models. It also discusses the history of supply...

Why is that the achievements of some disinflations from low and moderate peaks are longlived, whereas in others the gains in the inflationary front dissipate quickly? Based on an index of the sustainability of disinflations proposed in the paper, various competing explanations of what determines...