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Identifying Taylor rules in macro-finance models

Backus, David; Chernov, Mikhail; Zin, Stanley E. - C.E.P.R. Discussion Papers - 2013

illustrate the problem in several macro-finance models with Taylor rules. When the shock to the rule is observed by agents but … not economists, identification of the rule's parameters requires restrictions on the form of the shock. We show how such …

Persistent link: https://www.econbiz.de/10011083775

The Simplest Test of Inflation Target Credibility

Svensson, Lars E O - C.E.P.R. Discussion Papers - 1994

A simple test of inflation target credibility is constructed by subtracting the maximum and minimum inflation rates consistent with the inflation targets from the yields to maturity on nominal bonds. This results in a target-consistent range of real yields on nominal bonds. If expected real...

Persistent link: https://www.econbiz.de/10005661572

New-Keynesian Macroeconomics and the Term Structure

Bekaert, Geert; Cho, Seonghoon; Moreno Ibáñez, Antonio - C.E.P.R. Discussion Papers - 2006

This article complements the structural New-Keynesian macro framework with a no-arbitrage affine term structure model. Whereas our methodology is general, we focus on an extended macro-model with unobservable processes for the inflation target and the natural rate of output which are filtered...

Persistent link: https://www.econbiz.de/10005136692

Central Banks: Powerful, Political and Unaccountable?

Buiter, Willem H. - C.E.P.R. Discussion Papers - 2014

Central banks’ economic and political importance has grown in advanced economies since the start of the Great Financial Crisis in 2007. An unwillingness or inability of governments to use countercyclical fiscal policy has made monetary policy the only stabilization tool in town. However, much...

Persistent link: https://www.econbiz.de/10011084413

Five-Equation Macroeconomics: A Simple View of the Interactions Between Fiscal Policy and Monetary Policy

Kirsanova, Tatiana; Stehn, Sven Jari; Vines, David - C.E.P.R. Discussion Papers - 2006

This paper studies the interactions of fiscal and monetary policy when they stabilise a single economy against shocks in a dynamic setting. We assume that fiscal and monetary policies both stabilise the economy only by causing changes to aggregate demand. Our findings are as follows. If the both...

Persistent link: https://www.econbiz.de/10005656218

Optimal Policy with Low-Probability Extreme Events

Svensson, Lars E O - C.E.P.R. Discussion Papers - 2004

, which completely ignores the low-probability extreme event. The case when the size of the extreme shock is endogenous and …

Persistent link: https://www.econbiz.de/10005661622

Time Consistency When Open Market Operations are the Monetary Policy Instrument: Is There Really a Deflation Bias?

Rankin, Neil - C.E.P.R. Discussion Papers - 2001

We re-examine optimal monetary policy in a dynamic general equilibrium model where open market operations are the only policy instrument. The government optimizes purely over private agents’ welfare. We use a money-in-the-utility-function approach with a welfare cost of ‘current’...

Persistent link: https://www.econbiz.de/10005661830

When Can Central Banks Anchor Expectations? Policy communication and controllability

Acocella, Nicola; Di Bartolomeo, Giovanni; Hughes … - C.E.P.R. Discussion Papers - 2008

Rational expectations are often used as a strong argument against policy activism, as they may undermine or neutralize the policymaker’s actions. Although this sometimes happens, rational expectations do not always imply policy invariance or ineffectiveness. In fact, in certain circumstances...

Persistent link: https://www.econbiz.de/10005661866

Debt Stabilisation Bias and the Taylor Principle: Optimal Policy in a New Keynesian Model with Government Debt and Inflation Persistence

Stehn, Sven Jari; Vines, David - C.E.P.R. Discussion Papers - 2008

Leith and Wren-Lewis (2007) have shown that government debt is returned to its pre-shock level in a New Keynesian model …-debt economy, it may be optimal for discretionary monetary policy to cut the interest rate in response to a cost-push shock … optimal fiscal response to such a shock is more active under discretion than commitment, whatever the degree of inflation …

Persistent link: https://www.econbiz.de/10005666963

Monetary Policies for Developing Countries: The Role of Institutional Quality

Huang, Haizhou; Wei, Shang-Jin - C.E.P.R. Discussion Papers - 2005

Weak public institutions, including high levels of corruption, characterize many developing countries. With a simple model, we demonstrate that institutional quality has important implications for the design of monetary policies and can produce several departures from the conventional wisdom. We...

Persistent link: https://www.econbiz.de/10005789083