Real interest and inflation rates have been very low in many industrialized countries since the Great Recession. In this paper, a mechanism of low and floating real interest and inflation rates is examined based on the concept a “Nash equilibrium of a Pareto inefficient path” and the law of motion for trend inflation. I show that, because the link between the marginal product of capital and the...

The breakdown of the Bretton Woods system and the adoption of generalized ‡oating exchange rates ushered in a new era of exchange rate volatility and uncertainty. This increased volatility lead economists to search for economic models able to describe observed exchange rate behavior. The present is a technical Appendix to Cerrato et al. (2009) and presents detailed simulations of the proposed m...

This paper examines the interaction of G7 real exchange rates with real output and interest rate differentials. Using cointegration methods, we generally find a link between the real exchange rate and the real interest differential. This finding contrasts with the majority of the extant research on the real exchange rate real interest rate link. We then identify a new measure of the equilibrium...

We study the fitting of the euro yield curve with the Longstaff and Schwartz (1992) (LS) two-factor general equilibrium model and the Schaefer and Schwartz (1984) (SS) two-factor arbitrage model of the term structure of interest rates. The Cox, Ingersoll, and Ross (1985b) (CIR) one-factor model is also studied as a reference. LS use the short-term interest rate and the volatility of the short-t...

In the wake of steep fall in national savings due to economic shocks, among them COVID-19 pandemic macroeconomic consequences, this study examines what extent inflation explains variation saving behavior developing countries. Most past empirical studies investigated role on only advanced nations. The current will investigate effect culture Kenya. To determine how saving, use s ordinary least sq...

This paper studies the information content of some Ifo indicators. In particular, we investigate whether two Ifo indicators, one on the current business situation, the other on current production development, provide information on revisions of German industrial production. A new feature of our analysis is the construction and use of a real-time dataset. We conclude that the Ifo indicators play...

Multiresolution wavelet analysis is a natural way to decompose economic time series into components of various frequencies: long-run trend, business-cycle component, and high frequency noise. This paper illustrates the method on real GNP and inflation. The business-cycle component of the wavelet-filtered series closely resembles the series filtered by the approximate bandpass filter (Baxter and...