We study how determinacy and expectational stability (E-stability) of rational expectations equilibrium may be affected by monetary policy when the cost channel of monetary policy matters. We focus on both instrumental Taylor-type rules and optimal target rules. We show that standard instrument...

We build a simple non-structural BVAR forecasting framework to predict key Peruvian macroeconomic data. We build our Litterman prior specification based on the fact that the structure driving the dynamics of the economy might have shifted towards a state where a clear nominal anchor has become...

We evaluate the expectational stability (E-stability) of rational expectations equilibrium in a simple "New Keynesian" small open economy model. In particular, we extend Bullard and Mitra (JME, 2002) results of E-stability in closed economy to an open economy framework by evaluating Taylor-type...

One of the key elements for inflation targeting regime is the right identification of inflationary or disinflationary pressures through the output gap. In this paper we provide an estimation of the Peruvian output gap using a multivariate unobserved component (MUC) model, relying on an explicit...