We characterize the change in the nature of the money growth-inflation and unemployment-inflation relationships between the first and second halves of the 20th century. The changes are substantial, and we discuss some of the implications for modeling inflation dynamics. ∗ Northwestern University and NBER. Christiano is grateful for a National Science Foundation Grant to the National Bureau of E...

The aim of this paper is determination of an optimal policy rule for Iranian economy from an Islamic perspective. This study draws on an Islamic instrument known as the Musharakah contract to design a dynamic stochastic general equilibrium model. In this model the interest rate is no longer considered as a monetary policy instrument and the focus is on the impact of economic shocks on the Dynam...

There exists a variety of papers dealing with the inflation generating process in Croatia. However, none of them touches upon the psychological factors driving inflation. Therefore this paper aims to fill in that niche. Applying the Carlson-Parkin method on consumer survey results, a direct measure of expected inflation is obtained. Its predictive characteristics regarding actual inflation dyna...

Several European countries adopted inflation targeting as a monetary policy strategy during the 1990s. This article evaluates the impact of the establishment of this policy framework on the dynamics of inflation for three countries: United Kingdom, Spain and Finland. While smaller shocks triggered most of the decline in their high frequency inflation volatility, this is not always the case for ...

This paper compares the performances of three alternative nominal anchors, i.e., price inflation, nominal income growth, and money growth in an estimated monetary business cycle model. The representative household’s lifetime utility is used as a natural welfare metric, and the welfare effects of the non-linear dynamics are captured by a quadratic approximate solution method. Strict inflation ta...

Official statistics measuring the cost of living are known to suffer from several biases. This paper shows that size biases can vary with economic conditions. Using homescan data, it is first confirmed official price indexes be tracked using such granular data sets. While often-acknowledged substitution bias shown relatively small, neglected preference adjustment and product entry/exit result i...

In this paper, we focus on the value of inflation-indexed bonds in an extended short rate model, which is a specific case of the general framework provided by Jarrow and Yildirim (2003). In the model, we assume mean-reverting stochastic dynamics under the risk neutral measure for both the short interest rate and the instantaneous inflation rate. We define the zero-coupon inflation-indexed bond,...