In the aftermath of the global financial crisis, the state of macroeconomic modeling and the use of macroeconomic models in policy analysis has come under heavy criticism. Macroeconomists in academia and policy institutions have been blamed for relying too much on a particular class of...

The neutral rate of interest is an important concept and communication tool for central banks. We develop a small open economy model with overlapping generations to study the determinants of the neutral real rate of interest in a small open economy. The model captures domestic factors such as...

This paper examines the reasons for the declining path of inflation since the 1970s. In particular, it focusses on the role of globalization - covering both changes in the global market structure and technical and structural developments in trade and production. In addition, the paper deals with...

We assess the impact of large-scale asset purchases, commonly known as quantitative easing (QE), conducted by Sveriges Riksbank and the European Central Bank (ECB) on bond risk premia in the Swedish government bond market. Using a novel arbitrage-free dynamic term structure model of nominal and...

This paper introduces a novel monetary policy framework where the exchange rate becomes the central instrument. Using Singapore as a case study, it explores the Monetary Authority's adoption of the exchange rate as the primary tool since 1981, diverging from conventional approaches centered on...

Singapore's unique monetary policy consists of a managed exchange rate framework that can be characterized as a Taylor-like reaction function with the nominal devaluation rate instead of the nominal interest rate as the main policy instrument. We build a small open economy New Keynesian model to...

Is inflation (still) a global phenomenon? We study the international co-movement of inflation based on a dynamic factor model and in a sample spanning up to 56 countries during the 1960-2023 period. Over the entire period, a first global factor explains approximately 58% of the variation in...

This paper studies the relative performance of alternative monetary policy rules in the presence of oil price shocks in a small open economy optimizing model. Our analysis shows that it is important to distinguish between alternative price indices (CPI, core CPI, and GDP deflator) when modeling...

The belief that the ECB follows the US Federal Reserve in setting its policy is so entrenched with market participants and commentators that the search for empirical support would seem to be a trivial task. However, this is not the case. We find that the ECB is indeed often influenced by the...