This paper examines if the joint behavior of inflation and relative price variability (RPV) is consistent with threshold nonlinearity. It applies the test procedure proposed by Tsay (1998) to monthly inflation and RPV in the U.S. for a period from January 1947 to October 2000, and finds strong evidence in favor of threshold nonlinearity that signifies asymmetries of the relationship between inf...

We study the low frequency comovements in unemployment, inflation and the federal funds rate in the U.S. From 1970 through 1979 all three series trended up together; after 1979 they all trended down. The conventional explanation for the buildup of inflation in the 1970s is that the Fed reacted to an increase in the natural rate of unemployment by conducting an overly passive monetary policy. We...

We extend the New Keynesian Monetary Policy literature relaxing the assumption that the decisions are taken by a single policymaker, considering instead that monetary policy decisions are taken collectively in a committee. We introduce a Monetary Policy Committee (MPC), whose members have different preferences between output and inflation variability and have to vote on the level of the interes...

A number of recent papers have explored monetary policy options, including inflation targeting and inflation forecast targeting (notably Svensson (1999a, 1999b, 2000)) and price level targeting (Wolman 2000, Batini and Yates 1999, Blinder 1999). Most papers explore “optimal” monetary policy in the context of a single model. However, a number of conclusions made in the literature depend strongly...

economic growth and employment. Good policy practice can be judged by the outcomes achieved. Therefore, I would like to briefly outline the Federal Reserve’s performance with respect to the level and the variability of inflation and growth. To be sure, the strong economic performance over the past two decades has several possible explanations, but the practice of monetary policy has likely cont...

We examine the relative ability of inflation targeting and price level monetary policy rules to minimize variability business cycle fluctuations in a commodity-exporting country for supply demand shocks global commodity markets. The macroeconomic consequences oil non-oil primary commodities differ affect merits alternative frameworks. Particularly, consumption refined products demand-driven mov...

The model proposed in this paper aims at identifying the best allocation of a limited quantity of product to a group of retailers supplied by a unique supplier, considering the variability of the demands faced on the market. The proposed approach aims at reducing the problem of demand inflation, inherent to many rationing policies, by considering the mean and the standard deviation of the deman...

What determined the volatility of asset prices in Germany between the wars? This paper argues that the influence of political factors has been overstated. The majority of events increasing political uncertainty had little or no effect on the value of German assets and the volatility of returns on them. Instead, it was inflation (and the fear of it) that is largely responsible for most of the va...

The DSGE model with endogenous and time-varying sticky information in Dräger (2010) is extended by allowing agents’ recursive choice between forecasts under rational or sticky information to affect the model solution. Dynamic equilibrium paths generate highly persistent series for output, inflation and the nominal interest rate. Agents choose predictors in a near-rational manner and we find tha...

This paper shows that monetary policy should be delegated to a central bank that cross-checks optimal policy with information from the Taylor rule. Attaching some weight to deviations of the interest rate from the interest rate prescribed by the Taylor rule is beneficial if the central bank aims at optimally stabilizing inflation and output gap variability under discretion. Placing a weight on ...