An important input to monetary policymaking is estimating the current level of inflation. This paper examines empirically whether the measurement of trend inflation can be improved by using disaggregated data on sectoral inflation to construct indexes akin to core inflation but with a time-varying distributed lags of weights, where the sectoral weight depends on the timevarying volatility and p...

Simple rules for guiding monetary policy actions have been shown to achieve policy objectives effectively. In many of these simple rules, policy prescriptions depend on the economy’s level of potential output. Potential output is unobservable, however, and is estimated with uncertainty. We examine the effects that this uncertainty has on the stabilization properties of three classes of simple e...

Empirical evidence presented in this paper shows that the predictability of inflation at long horizons varies considerably across countries. Both simple theory and empirical evidence suggest that the crucial factor is the extent to which systematic monetary policy succeeds in stabilising the incipient unit root in inflation. The mechanism by which it does this appears however to be complicated ...

We study a model with repeated moral hazard where financial contracts are not fully indexed to inflation because nominal prices are observed with delay, as in Jovanovic & Ueda (1997). More constrained firms sign contracts that are less indexed to inflation, and as a result, their investment is more sensitive to nominal price shocks. We also find that the overall degree of nominal indexation inc...