To date the cointegrating properties and the regime-switching behavior of the term structure are two separate strands of the literature. This paper integrates these lines of research and introduces regime shifts into a cointegrated VAR model. We argue that the short-run dynamics of the...

This paper studies the time-varying role of the cost channel of monetary transmission, i.e. the supply-side effect of monetary policy based on firms' costs of holding working capital. For that purpose, we provide rolling-window estimates of an augmented New Keynesian Phillips curve and show that...

Recent research argues that model uncertainty leads the central bank to adjust interest rates stronger to exogenous disturbances than under certainty. This paper investigates whether the introduction of a cost channel of monetary transmission, whose presence is empirically supported, changes the...

We introduce heterogeneity into a monetary policy committee by allowing the degree of model uncertainty to differ across members. It is shown that in this framework the stage at which members reach consensus matters. An aggregation protocol under which members only average policy deemed optimal...

The Federal Open Market Committee (FOMC) of the Federal Reserve consists of voting- and non-voting members. Apart from deciding about interest rate policy, members individually formulate regular inflation forecasts. This paper uncovers systematic differences in individual inflation forecasts...

This note uncovers the Phillips curve trade-off perceived by U.S. monetary policymakers. For that purpose we use data on individual forecasts for unemployment and inflation submitted by each individual FOMC member, which was recently made available for the period 1992-1998. The results point to...

Discretionary monetary policy suffers from a stabilization bias, whose size is known to be dependent on the degree of shock persistence. This note analyzes the size of this bias and, consequently, the rationale for delegating monetary policy to an inflation-averse central banker, when the...

Once you allow for persistence in macroeconomic variables, two aspects of exchange rate credibility emerge whose relative importance can vary over time. Hence, the effect of policy measures on interest rate differentials becomes ambiguous. In this paper, a Markov-switching VAR that allows for...

With persistence in macroeconomic variables two aspects of exchange rate credibility emerge whose relative importance varies over time. Both aspects have opposite implications for the relation between fundamentals and credibility. Hence, the effect of policy measures on interest rate...