Research Problem: The primary purpose of the paper is to set up a macroeconomic model that depict domestic inflation dynamics in a conflict economy impeded by parallel market for foreign exchange and internal political conflict. Research methodology: To investigate domestic inflation sensitivity...

This paper studies optimal monetary policy in a small open economy with Inflation Targeting, incomplete pass-through and rigid nominal wages. The paper shows that the right index to target depends on the structure of the individual economy. When wages are fully flexible, the consumer price index...

In recent papers it is shown that in the presence of price stickiness, investment and capital accumulation activity, active monetary policy (MP) rules can lead to indeterminacy under various assumptions about the structure of the model. We analyze the conditions for real indeterminacy to occur...

A new monetary theory is set out to resolve the “Uncovered Interest Parity Puzzle (UIP Puzzle)”. It explores the possibility that liquidity properties of money and nominal bonds can account for the puzzle. A key concept in our model is that nominal bonds carry liquidity premium due to their...

The Taylor hypothesis is the conjecture that the 2007-2009 financial crisis and the 2008-present downturn have been caused by loose monetary policy during 2002-2006. According to the Taylor hypothesis the Fed deviated from well-know rules of monetary policy-making over this period, and this...

The purpose of this paper is to provide a new set of tools for policy makers at central banks. Based on the Garman-Kohlhagen formula for currency options, this research extends it with the Taylor-rule expression used for inflation targeting, thus obtaining the corresponding Call and Put options...

This paper presented the empirical results of the volatility transmission of overnight rate along the yield curve in case of Pakistan. The results indicate that the volatility transmission of overnight repo rate is higher at the shorter end of the yield curve while lower at the longer end. These...

This paper demonstrates how to analytically characterize the set of rational expectations equilibria in a simple stochastic New Keynesian model with the zero lower bound. In this environment, purely forward-looking (non-history-dependent) monetary policies are not generally consistent with...

We derive the new Keynesian IS curve from the Fisher relation and the expectations theory of the term structure, without reference to household preferences. We show that, under certain conditions, parameters of the empirical new Keynesian IS curves need not be estimated but can be calibrated...

Recent innovations have made it feasible to transfer private digital currency without the intervention of an institution. A digital currency must prevent users from spending their balances more than once, which is easier said than done with purely digital currencies. Current digital currencies...