In this paper we study 2-state Markov switching VAR models of monthly unemployment and inflation for three countries: Sweden, United Kingdom, and the United States. The primary purpose is to examine if periods of low inflation are associated with high or low unemployment volatility. We find that...

Firms’ market power, measured by markups, has risen substantially and unequally across sectors. To evaluate the implications of these trends for monetary non-neutrality, we develop a quantitative menu cost model that covers multiple sectors with heterogeneous degrees of market competition. Two...

A major concern of entrepreneurs and monetary authorities in Nigeria in the past decades was successful prediction general price level movements. The results allow successful planning on the part of monetary authorities and continued profit drive on the part of entrepreneurs and investors. This...

We estimate a multivariate unobserved components-stochastic volatility model to explain the dynamics of a panel of six exchange rates against the US Dollar. The empirical model is based on the assumption that both countries' monetary policy strategies may be well described by Taylor rules with a...

About twenty years ago, an article by van der Ploeg analysed the implications of the J-curve effect for the political business cycle in a small open economy [van der Ploeg (1989c)]. It was them shown that a sudden jump on the exchange rates in the election day should be observed if the...

Determining the exchange rate pass-through on inflation is a necessity for central banks as well as for firms and households. This is an apparently easy and intuitive task, but it faces high complexity and uncertainty. This paper examines the short and long-term impact of an exchange rate shock...

How strong are strategic complementarities in price setting across firms? In this paper, we provide a direct empirical estimate of firms' price responses to changes in prices of their competitors. We develop a general framework and an empirical identification strategy to estimate the...