Monetary policy has been usually analyzed in the context of small macroeconomic models where central banks are allowed to exploit a limited amount of information. Under these frameworks, researchers typically derive the optimality of aggressive monetary rules, contrasting with the observed...

This paper documents a new stylized fact of the U.S. greater macroeconomic stability of the last two decades or so. Using 131 monthly time series, three popular statistical methods and the forecasts of the Federal Reserve's Green book and the Survey of Professional Forecasters, we show that the...

Real exchange rate misalignment measures deviations of actual real exchange rate from its long-run, or equilibrium, level. Policy makers and many researchers are interested in predicting and monitoring misalignment in the foreign exchange market, because, in many cases, it is closely related to...

Using a recently introduced nonparametric test, I investigate two important and distinct asymmetries in cross-country quarterly macroeconomic time series. Asymmetries are suggested by many theories (old and new), and those discovered aid in the selection of the appropriate nonlinear time series...

This paper examines the small-sample distribution of the instrumental variables (IV) estimation procedure employed by Gali and Gertler (1999) to assess the empirical fit of the New Keynesian Phillips Curve (NKPC) and the hybrid Phillips Curve (HPC). Their estimation method is now widely used to...

Compared to its central role in policy discussions in the United States and most other developed countries, the reliability of the measurement of the output gap has attracted relatively little academic study. Furthermore, both the academic literature and the debate among practitioners have...

This paper applies the robust control approach to a simple positive theory of monetary policy, when the central bank’s model of the economy is subject to misspecifications. It is shown that a central bank should react more aggressively to supply shocks when the model misspecifications grow...

We study the effects of model uncertainty in a simple New-Keynesian model using robust control techniques. Due to the simple model structure, we are able to find closed-form solutions for the robust control problem, analysing both instrument rules and targeting rules under different timing...

This paper applies the robust control approach to a simple positive theory of monetary policy, when the central bank’s model of the economy is subject to misspecifications. It is shown that a central bank should react more aggressively to supply shocks when the model misspecifications grow...

This paper investigates the effect of a positive technology shock on per capita hours worked within the class of Bayesian Vector Auto-Regressive [BVAR] models. Such a framework avoids the current debate regarding the specification issue of per capita hours [level versus first-difference...