The rational expectations hypothesis for survey and model-based inflation forecasts − from the Survey of Professional Forecasters and the Greenbook respectively − is examined by properly taking into account persistence in the data. The finding of nearunit-root effects in inflation and...

The three-equation New-Keynesian model advocated by Woodford (2003) as a selfcontained system on which to base monetary policy analysis is shown to be inconsistent in the sense that its long-run static equilibrium solution implies that the interest rate is determined from two of the system’s...

The aim of this paper is to study the main macroeconomic, financial and structural characteristics that affected current account developments in Greece over the period 1960-2007 and link these to the issue of external sustainability. Concerns over Greece’s external sustainability have emerged...

This paper examines the optimal design of monetary policy in the European monetary union in the presence of structural asymmetries across union member countries. It derives analytically an optimal interest rate rule under commitment and studies the dependence of its coefficients on the...

This paper develops an international oligopoly model where foreign and domestic firms simultaneously choose their pricing strategies under the assumption of non-zero conjectural variations. The model captures the links between domestic and foreign producers’ prices and establishes a...

The ability of the New Keynesian Phillips curve to explain US inflation dynamics when official central bank forecasts (Greenbook forecasts) are used as a proxy for inflation expectations is examined. The New Keynesian Phillips curve is estimated on quarterly data spanning the period...

This paper evaluates the role of inflation-forecast heterogeneity in US monetary policy making. The deviation between private and central bank inflation forecasts is identified as a factor increasing inflation persistence and thus calling for a policy reaction. An optimal policy rule is derived...

The present paper exploits the idea that empirical estimates of the long-run PPP relationship may compound two distinct influences coming from the behavior of market participants and policy makers when the latter are targeting the exchange rate. This tends to bias tests of long-run PPP against...

We develop a theoretical framework that extends the Bernanke and Blinder (1988) model to incorporate imperfect substitution between internal and external finance of firms in order to study the operation of both the bank lending and the balance sheet channels of monetary transmission in the US....

This paper develops a macro-finance term structure model based on the expectations hypothesis extended to include a time-varying term premium. The model establishes inter alia the link between quantitative easing and the term premium, allowing us to measure the total impact on the bond yield of...