The chapter argues for rules to coordinate monetary and fiscal policies. But the rules are rule like only in imposing forward-looking behaviour, while they allow the discretion to respond to shocks. They would serve to anchor expectations, and align private sector actions with desired outcomes....

Considerable debate rages about whether Federal Reserve policy was too lax in the early part of the 2000s, thereby fueling the home-price bubble that was the proximate cause of the global financial crisis. We present evidence that the view that modest alterations to monetary policy have vast...

This paper investigates the role of the term spread to predict domestic output and inflation in less developed financial market with the focus on Malaysia bond market. By controlling for past values of the dependent variable, this paper finds that the term spread of various bond maturities...

Since December 2008, the Federal Reserve’s traditional policy instrument, the target federal funds rate, has been effectively at its lower bound of zero. In order to further ease the stance of monetary policy as the economic outlook deteriorated, the Federal Reserve purchased substantial...

Methodological suggestions are made for two separate issues. First, I show how a consistent estimate of the level of the expected inflation can be gleaned from inflation swap rates. Second, I indicate how the dynamic general equilibrium model in question can be modified to generate the observed...

A multitude of factors contributed to the housing booms and crashes experienced in many countries and the ensuing global financial crisis. Much of the existing research on these issues assumes that agents have complete information about the economic environment and form rational expectations....

We investigate the relation between aggregate trading imbalances and interest rates in the Euro money market. We use data for OTC contracts as well as information from the major electronic trading platform in Europe to study the presence of cointegration between trading pressures and money...

The similarities yet differences across South Asian countries, and their differential response to recent food and oil price shocks, gives a useful opportunity to better understand the structure of inflation in these economies. Analysis of the internal and external balance and evidence on demand...

This paper uses kernel methods to estimate a seven variable time-varying (TV) vector autoregressive (VAR) model on the US data set constructed by Smets and Wouters. We use an indirect inference method to map from this TV VAR to time variation in implied dynamic stochastic general equilibrium...

Studies of the Bank of England’s quantitative easing (QE) policy have tended to focus on its impact on financial markets and the broader macroeconomy. Less attention has been given to the effect on banks’ balance sheets and bank lending. In this paper we use a new non-publicly available...