We investigate the relationship between uncertainty about monetary policy and its transmission mechanism, and economic fluctuations. We propose a new term structure model where the second moments of macroeconomic variables and yields can have a first-order effect on their dynamics. The data favors a model with two unspanned volatility factors that capture uncertainty about monetary policy and t...

In brane inflationary scenarios, the cosmological perturbations are supposed to originate from the vacuum fluctuations of the inflaton field corresponding to the position of the brane. We show that a significant, and possibly dominant, contribution to the curvature perturbation is generated at the end of inflation through the vacuum fluctuations of fields, other than the inflaton, which are lig...

Here we investigate the existence of credit in a cash-in-advance economy where there are complete markets but for the fact that agents cannot commit to repay their debts. Defectors are banned from the credit market but they can use money balances for saving purposes. Without uncertainty, deflation crowds out credit completely. The equilibrium allocation, however, is efficient if the government ...

A general-equilibrium shopping-time model ofmoney demand is used to obtain estimates ofsome dynamic costs ofinflation under alternative monetary policy rules. After examining the welfare implications ofsteady-state inflation, dynamic welfare costs are evaluated for inflation-targeting and price-level targeting regimes in a stochastic setting in which agents are uncertain about the underlying in...

It is very appropriate that a conference on monetary policy transparency begin with a paper by Alex Cukierman. His 1986 paper with Allan Meltzer was the first modern treatment of transparency and the model developed in that paper continues to serve as the basic framework for much of the recent work in this area. Economists at most major central banks seem to feel the average inflation bias that...

In the literature there are many determinants for the times series of US stock returns. The most notable are: inflation, inflation uncertainty, and the relative change in the value of the US dollar. This paper aims to reconsider and update this research question. Monthly data sets are used with the S&P 500 as the measure of the stock market index, and the US trade-weighted foreign exchange rate...

Considering market-based inflation expectations, we show that investors’ forecasts are non-linear. We capture this non-linear behavior with a Markov-switching model allows us to identify regime of high uncertainty, and low uncertainty concern about inflation. Using complete cross-asset panel equity sectors, bonds, commodities, perform regressions in both regimes including several control variab...

N recent years, many countries have experienced “stagflation,” a period of high and rising inflation and unemployment. Over this time, higher inflation increasingly has come to be blamed for higher unemployment and reduced growth of real output. This contrasts sharply with previously held notions that there was either a long-run tradeoff between inflation and unemployment or a “natural rate of ...

N RECENT YEARS, several supply shocks —unusual shifts in production costs —have kept U.S. inflation low by putting downward pressure on prices for certain commodities, especially computers, health care and, until 1996, energy. 1 Because the sectors producing these goods and services are important to the Eleventh Federal Reserve District, these shocks have had an impact on its economy. After exa...