This paper takes a new look at the long-run dynamics of inflation and unemployment in response to permanent changes in the growth rate of the money supply. We examine the Phillips curve from the perspective of what we call "frictional growth", i.e. the interaction between money growth and...

Using a macroeconomic model with asset prices, we analyze how optimal monetary policy, and macroeconomic dynamics and performance are affected by the central bank’s desire to be robust against model misspecifications. Considering the worst-case model, we show that an increase in the central...

Monetary shocks largely affect economic activity in Western Australia. In smaller proportion, those shocks generate contractions in New South Wales, Victoria and South Australia, while economic activity in Queensland is significantly less affected. Finally, we develop a new approach to uncover...

In case of speculative attacks, the central banks' decisions to intervene or not to intervene seem to play an important role for the economic costs of currency crises. The central bank can either abstain from intervening or start an intervention, which in turn can be successful or unsuccessful....

Though the hypothesis that exchange rate regimes fully predetermine monetary policy in the face of external shocks hardly finds any advocates in the field of theory, it has crept into empirical research. This study adopts a careful and rigorous empirical approach that looks at monetary policy...

There exist sticky price models in which the output response to a government spending change can be large if the central bank is nonresponsive to inflation. According to this “expected inflation channel,” government spending drives up expected inflation, which in turn, reduces the real...

This paper examines the relationship between inflation and inflation expectations of analysts, business, and trade unions in South Africa during the inflation targeting (IT) regime. We consider inflation expectations based on the Bureau of Economic Research (BER) quarterly survey observed from...

This paper seeks to evaluate quantitatively how interbank and corporate cross-border flows shape business cycles in a monetary union. Using Bayesian techniques, we estimate a two-country DSGE model that distinguishes between Eurozone core and peripheral countries and accounts for national...

This paper investigates how three major political conditions—political constraint (imposed by veto players), government partisanship, and elections—have influenced the government responses to financial crises in 98 developing countries over the period 1976–2004. We find that governments...

This paper studies exchange rate policy in a small open economy model featuring an occasionally binding collateral constraint and Fisherian deflation. The goal is to evaluate the performance of alternative exchange rate policies in sudden stop-prone economies. The key element of the analysis is...