Monetary conditions indices featured prominently as instrument variables or operating targets, particularly in the inflation-targeting countries during the 1990s. In this paper, we show that conventional monetary conditions indices are potentially mis-specified. Under a regime of strict...

This paper shows how the exchange rate affects the price-setting behavior of monopolistically competitive firms in the sticky price framework that gives rise to a forward-looking Phillips Curve at the aggregate level. The open economy Phillips Curve differs from its closed economy counterpart in...

The close integration of Australian and New Zealand financial markets and the similarity of the monetary policy regimes provide the perfect backdrop for testing the empirical relevance of uncovered interest rate parity (UIP) in Oceania. We find that changes in the bilateral exchange rate have...