When generating conditional forecasts in dynamic models it is common to impose the conditions as restrictions on future structural shocks. However, these conditional forecasts often ignore that there may be uncertainty about the future development of the restricted variables. Our paper therefore...

Much empirical evidence suggests that wage increases do not lead to inflation. This paper demonstrates that a 2-sector dynamic general equilibrium model calibrated to the U.S. economy is able to explain this evidence. We quantify the effect of an increased wage-markup on the inflation rate in...

This paper considers the evidence of "near-rationality," as described by Akerlof, Dickens, and Perry (2000). Using detailed surveys of household inflation expectations for the United States and Sweden, we find that the data are generally unsupportive of the near-rationality hypothesis. However,...

The correlation between persistent changes in the markup in one sector of an economy and the inflation rate is quantified in a 2-sector dynamic general equilibrium model. How this relationship is affected by monetary policy is also studied. We find that the correlation is in general positive...

This paper analyzes the use of announcements of objectives or intentions, announcements which are common in implementation of monetary policy. To analyze such announcements, this paper uses a model in which there is asymmetric information over the central bank's objectives. This informational...

We consider forecast combination and, indirectly, model selection for VAR models when there is uncertainty about which variables to include in the model in addition to the forecast variables. The key difference from traditional Bayesian variable selection is that we also allow for uncertainty...

Cross institutional forecast evaluations may be severely distorted by the fact that forecasts are made at different points in time, and thus with different amount of information. This paper proposes a method to account for these differences. The method computes the timing effect and the...

There are many indications that formal methods are not used to their full potential by central banks today. In this paper we demonstrate how BVAR and DSGE models can be used to shed light on questions that policy makers deal with in practice using data from Sweden. We compare the forecast...

We conduct a novel empirical analysis of the role of leverage of financial institutions for the transmission of financial shocks to the macroeconomy. For that purpose, we develop an endogenous regime-switching structural vector autoregressive model with time-varying transition probabilities that...

There has been a call for caution when using the conventional method for Bayesian inference in setidentified structural vector autoregressions on the grounds that the uniform prior over the set of orthogonal matrices could be nonuniform for individual impulse responses or other quantity of...