This paper documents some new empirical results about the monetary policy and long-term interest rates in the United States. It shows that changes in the monetary policy stance are more predictable to the bond market in the 1990s than in the 1970s. This shift in the predictability of the monetary policy actions affects the policy’s impact on long-term interest rates as well as the forecasting p...

This paper empirically analyzes the non-monotonic influence that interest rate changes have on irreversible investment in income producing properties. Using the complete history of quarterly capital improvements for 1,416 commercial properties over the 1978 to 2009 period, we find strong evidence of the non-monotonic effect for apartment, office, and retail properties, but not for industrial pr...

In many countries, wage changes tend to be clustered in the beginning of the year, with wages being set for xed durations of typically one year. This has been, in particular, documented in recent years for European countries using microeconomic data. Motivated by this evidence we build a model of uneven wage staggering, embedded in a standard DSGE model of the euro area, and investigate the mon...

In this paper we evaluate the empirical performance of a medium–scale DSGE model (Smets andWouters 2007) when agents form expectations about forward variables by using small forecasting models. Agents learn about these simple AR and VAR forecasting models through Kalman filter estimation and they combine them either using a prediction basedweighting scheme or fixed weights. The results indicate...

This paper investigates whether the funding behaviour of euro area debt management offices (DMOs) changed with start ECB’s Public Sector Purchase Programme (PSPP). Our results show that (i) lower yield levels and (ii) PSPP purchases supported higher maturities at issuance. The former indicates a “locking in low rates for longer”, while latter suggests existence an additional “demand effect” on ...

We provide evidence of the stock market consumption wealth effect by using a local labor analysis. An increase in driven aggregate prices increases employment and payroll nontradable industries total, with no on tradable industries. In model geographic heterogeneity wealth, these responses imply an MPC 3.2 cents per year that 20 percent valuations, unless countered monetary policy, bill at leas...

Over the past 15 years there has been remarkable progress in the specification and estimation of dynamic stochastic general equilibrium (DSGE) models. Central banks in developed and emerging market economies have become increasingly interested in their usefulness for policy analysis and forecasting. This paper reviews some issues and challenges surrounding the use of these models at central ban...

T he world economy has experienced a bulk of positive and negative shocks in crude oil prices and exchange rates over the years, and that global inflation has undergone some changes. Such shocks have affected the macroeconomic variables in the countries of the world and have challenged the economies of these countries, and have led them to take different measures to protect themselves agai...

We compare macroeconomic models of sticky-prices (Calvo and Costsof-adjustment) with flexible price models in terms of optimal seigniorage. This sheds light on the importance of relative price distortions. Sticky-price models with no price dispersion terms have unattractive implications, we argue, when it comes to the derivation of optimal policies. We provide examples where they may imply very...

This study examines the expectational stability of the rational expectations equilibria (REE) under alternative Taylor rules when trend inflation is non-zero. We find that when trend inflation is high, the REE is likely to be expectationally unstable. This result holds true regardless of the nature of the data (such as contemporaneous data, forecast, and lagged data) introduced in the Taylor ru...