The first two methods seem appropriate for the measuring of the “cost of living,” as they cover the consumption of the service produced by housing. The payments method reflects the actual outlay for owning a dwelling for shelter purposes; it can be regarded as a simplified version of the user cost method. The user cost method, as adopted by Canada and Sweden, includes the opportunity cost of ow...

This paper investigates the relationship between changes in the output and inflation processes and monetary policy in the US over the last 25 years. It estimates a structural Bayesian TVC-VAR, where sign restrictions are used to identify monetary policy shocks, and analyzes the transmission of disturbances to the non-systematic and to the systematic component of monetary policy. Impulse respons...

In this paper we study optimal monetary policy in a model that integrates the modern theory of unemployment with a liquidity model of monetary transmission. Two policy environments are considered: period by period optimization (time consistency) and full commitment (Ramsey allocation). When the economy is subject to productivity shocks, the optimal policy is pro-cyclical. We also characterize t...

Many empirical studies find robust evidence that marginal cost of production directly depends on the nominal rate of interest. This relationship induces a cost channel for monetary policy transmission. Although the empirical literature provides ample evidence for a cost channel, studies that evaluate the welfare gains from monetary policy commitment have so far entirely ignored its presence. Th...