We highlight how detrending within Structural Vector Autoregressions (SVAR) is directly linked to the shock identification. Consequences of trend misspecification are investigated using a prototypical Real Business Cycle model as the Data Generating Process. Decomposing the different sources of...

This paper presents evidence on why inflation pass-through from oil shocks in the 21st century relative to the 1970s has dampened. First, results suggest global business cycle demand driven oil shocks are not inflationary. Second, there has been a reduction in inflation pass-through from oil...

Analysis of the Michigan Survey data confirms U.S. inflation expectations are not perfectly anchored in the event of an oil price shock. Two key results emerge through counterfactual analysis. First, better anchoring of inflation expectations can ameliorate the mild inflation impact which occurs...

This paper proposes quantifying the evolution of the U.S. output-inflation tradeoff using a Time-Varying Parameter Structural VAR. This methodology circumvents issues with existing methods which tend to be either reduced form in nature or rely on more ad hoc assumptions regarding sample split...

A puzzle from the Great Recession is an apparent mismatch between a fall in the persistence of European inflation rates, and the increased variability of expert forecasts of inflation. We explain this puzzle and show how country specific beliefs about inflation are still quite close to the...

Using the Bank of Canada's main projection and policy-analysis model, ToTEM, this paper measures the welfare gains of switching from inflation targeting to price-level targeting under imperfect credibility. Following the policy change, private agents assign a probability to the event that the...

In this paper, we use an economics decision-making experiment to test a key assumption underpinning the efficacy of price-level targeting relative to inflation targeting for business cycle stabilization and mitigating the effects of the zero lower bound on nominal interest rates. In particular,...

A view advanced in the aftermath of the late-2000s financial crisis is that lower than optimal interest rates lead to excessive risk taking by financial intermediaries. We evaluate this view in a quantitative dynamic model in which interest rate policy affects risk taking by changing the amount...

We incorporate inferential expectations into the Barro-Gordon model (1983a) of time inconsistency and consider reputational equilibria. The range of sustainable equilibria shrinks as the private sector becomes more belief-conservative.

This paper measures the welfare gains of switching from inflation-targeting to price-level targeting under imperfect credibility. Vestin (2006) shows that when the monetary authority cannot commit to future policy, price-level targeting yields higher welfare than inflation targeting. We revisit...