Credibility of an exchange rate policy is one of the most important factors contributing to success or failure of any stabilization program. Authorities usually hope that the public will trust official exchange rate commitments and take decisions regarding domestic currency holdings accordingly....

Monetary policy and inflation in Georgia in the years 1996-1998 are the subject of this paper. As it is written in the middle of 1997, the discussed period is in a natural way divided into two parts: past and future. Correspondingly, first sections of the paper deal with facts which have already...

This paper estimates responses to monetary shocks for several of the current members of the EMU (in the pre-EMU sample) and for the Central and East European (CEE) countries, along with the mean response in each of the groups. The problem of the short sample, especially acute in the case of the...

After stabilization in 1993 Moldova maintained an unsustainable macroeconomic policy mix. The key problem was a lack of a fiscal adjustment, which resulted in large budget deficits. At the same time, the National Bank of Moldova (NBM) attempted to conduct a tight monetary policy. As a result,...

This paper compares responses to monetary shocks in the EMU countries (in the pre-EMU sample) and in the New Member States (NMS) from Central Europe. The small-sample problem, especially acute for the NMS, is mitigated by using a Bayesian estimation procedure which combines information across...

The correct implementation of the Durbin and Koopman simulation smoother is explained. A possible misunderstanding is pointed out and clarified for both the basic state space model and for its extension that allows time-varying intercepts (mean adjustments).

This paper estimates a Bayesian vector autoregression for the U.S. economy that includes a housing sector and addresses the following questions: Can developments in the housing sector be explained on the basis of developments in real and nominal gross domestic product and interest rates? What...

Many factors inhibiting and facilitating economic growth have been suggested. Can agnostics rely on international income data to tell them which matter? We find that agnostic priors lead to conclusions that are sensitive to differences across available income estimates. For example, the PWT 6.2...

We propose a benchmark prior for the estimation of vector autoregressions: a prior about initial growth rates of the modelled series. We first show that the Bayesian vs frequentist small sample bias controversy is driven by different default initial conditions. These initial conditions are...

After 2012, inflation has been unexpectedly low across much of the developed world and economists speak of a “missing inflation” puzzle, namely inflation was expected to be higher on the back of an ongoing recovery. This paper investigates the causes and consequences of low inflation in the...