Recently there has been a signi"cant decline in the degree to which "rms &pass through' changes in costs to prices, a decline that is frequently characterized as a reduction in the &pricing power' of "rms. The decline appears to be associated with the decline in in#ation in many countries. The decline has important implications for monetary policy because it a!ects both forecasts of in#ation an...

In this paper the long-run trend in CPI in‡ation (core in‡ation) for Italy is estimated over the 1962-1997 period within the framework of a multivariate common trends model. In this framework core in‡ation is directly linked to money and wage growth and interpreted as the long-run forecast of in‡ation. This measure displays several desirable properties: lower variability than observed in‡ation,...

This paper uses a structurally estimatedmacroeconometricmodel, denoted the MC model, to evaluate in ation targeting in the United States. Various interest rate rules are tried with differing weights on in ation and output, and various optimal control problems are solved using differing weights on in ation and output targets. Price-level targeting is also considered. The results show that 1) the...

It has been widely accepted that politically induced variance can be generated when the wage contract is written before an election. In this paper, we show that in°ation contracts and in°ation targets can eliminate both the in°ation bias and politically induced variance, if electoral uncertainty is merely due to di®erent preferences. In contrast to the independent central bank that is based on ...

Matters have come to a pretty pass when an offi cial of the largest commercial bank in the land publicly mocks the central bank’s undying concern about infl ation. The tale is told in The Globe and Mail (01/26, “Missing in action at a mall near you: Infl ation” by Heather Scoffi eld): “The DVD player selling for $39.95 is putting the Bank of Canada in a quandary. “Prices for electronics and imp...

In‡ation targeting is shown to imply in‡ation forecast targeting: the central bank’s in‡ation forecast becomes an explicit intermediate target. In‡ation forecast targeting simpli...es both implementation and monitoring of monetary policy. The weight on output stabilization determines how quickly the in‡ation forecast is adjusted towards the in‡ation target. Money growth or exchange rate targeti...

This paper investigates the relationship between short term and long term in‡ation expectations in the US and the UK with a focus on in‡ation pass through (i.e. how changes in short term expectations a¤ect long term expectations). An econometric methodology is used which allows us to uncover the relationship between in‡ation pass through and various explanatory variables. We relate our empirica...

We provide a new perspective on disagreement in in‡ation expectations by examining the full probability distributions of UK consumer in‡ation forecasts based on an adaptive bootstrap multimodality test. Furthermore, we compare the in‡ation forecasts of the Bank of England’s Monetary Policy Committee (MPC) with those of UK consumers, for which we use data from the 2001-2007 February GfK NOP cons...

The primary objective of Eurosystem monetary policy is to maintain price stability, de…ned as an annual increase in the HICP below two percent. 1 Because of the lags in the e¤ects of monetary-policy actions on aggregate demand and in ‡ation, monetary-policy actions cannot a¤ect current in ‡ation and output, nor in ‡ation or output in the near future. A rough benchmark is that monetary policy a¤...

The paper presents the re e tion fa ilities of the spe i ation language Slam-sl. Slam-sl is an obje t oriented spei ation language where lass methods are spe i ed by pre and post onditions. The re e tion apabilities permit managing these pre and post onditions in spe i ations what means that semanti re e tion is possible. The range of interesting appli ations is very wide: formal spe i ation of...