We solve a dynamic stochastic general equilibrium (DSGE) model in which the representative household has Epstein and Zin recursive preferences. The parameters governing preferences and technology are estimated by means of maximum likelihood using macroeconomic data and asset prices, with a...

It is rather common to have several competing forecasts for the same variable, and many methods have been suggested to pick up the best, on the basis of their past forecasting performance. As an alternative, the forecasts can be combined to obtain a pooled forecast, and several options are...

This paper examines the distribution of output around capacity when money demand is a non-linear function of the nominal interest rate such that nominal interest rates cannot become negative. When fluctuations in output result primarily from disturbances to the money market, the variance of...

This paper uses a threshold autoregressive (TAR) framework to assess the relative importance of structural breaks and asymmetric persistence in accounting for the post-war unemployment experience. In comparing unemployment patterns across time periods and countries, we take the US as a...

Several industrialised countries have had a similar inflation experience in the past 30 years, with inflation high and volatile in the 1970s and the 1980s but low and stable in the most recent period. We explore the dynamics of inflation in these countries via a time-varying factor model. This...

This Paper takes a new look at the long-run dynamics of inflation and unemployment in response to permanent changes in the growth rate of the money supply. We examine the Phillips curve from the perspective of what we call ‘frictional growth’, i.e. the interaction between money growth and...

There are two main forces behind the large US current account deficits. First, an increase in the US demand for foreign goods. Second, an increase in the foreign demand for US assets. Both forces have contributed to steadily increasing current account deficits since the mid-1990s. This increase...

This paper presents a model that explains why in the transition economies of Central and Eastern Europe an important output fall has been associated with price liberalization. Its key ingredients are search frictions and Williamsonian relation-specific investment implying that new investments...

This Paper generalizes the standard habit formation model to an environment in which agents form habits over individual varieties of goods as opposed to over a composite consumption good. We refer to this preference specification as ‘deep habit formation’. Under deep habits, the demand...

The Paper looks for evidence of grease and sand effects in Europe, in particular the possibility that the natural rate of unemployment is affected by the inflation rate. Looking at four countries, France, Germany, the Netherlands and Switzerland, the Paper reports some preliminary evidence that...