This paper examines the impact of uncertainty on estimated response of stock returns to U.S. monetary policy surprise. This is motivated by the Lucas island model which suggests an inverse relationship between the effectiveness of a policy and the level of uncertainty in the economy. Using high...

Conventional VAR estimation and forecasting ignores the fact that economic data are often subject to revision many months or years after their initial release. This paper shows how VAR analysis can be modified to account for such revisions. The proposed approach assumes that government...

This paper analyzes the performance of central banks in 27 inflation targeting countries by examining their success in achieving their explicit inflation targets. For this purpose, we decompose the inflation gap, the difference between actual inflation and inflation target, into predictable and...

This paper seeks to answer two questions in the context of the Indian economy. First, are all movements in food and energy prices transitory? Second, is there a significant relationship between permanent and transitory shocks to different components of the aggregate price level? Using monthly...

This paper uses an unobserved component model with heteroskedastic disturbances based on Harvey et al. (1992) to measure the time-varying importance of permanent and transitory components in the U.S. house prices. Our findings show that the cyclical component in the U.S. housing market is highly...

This paper proposes a modified present-value model that takes into account the fact that movements in the price-rent ratio for housing may not be mean-reverting. Our approach decomposes the price-rent ratio into expected real rent growth, expected housing return and a non-present-value (NPV)...

This paper proposes a modified present-value model that takes into account the fact that movements in the price-rent ratio for housing may not be mean-reverting. Our approach decomposes the price-rent ratio into expected real rent growth, expected housing return and a non-present-value (NPV)...

In this paper, we estimate expected return on housing by exploiting information from the variations in the consumption- wealth ratio. We combine a present-value model of consumption with an unobserved component model to express the excess consumption-assets ratio (consumption in excess of labor...

This paper studies the role of the real money gap — the deviation of real money balance from its long-run equilibrium level — for predicting inflation in India. Using quarterly data on manufacturing inflation from 1982 to 2007, we find that the real money gap is a significant predictor of...