This paper exploits the Lucas’ (1973) signal extraction model to study the effect of uncertainty in the output-inflation trade-off on inflation, using a monetary model with asymmetric central bank preferences over inflation and output. We show that the implication of the uncertainty is...

We extend Ruge-Murcia (2003, 2004) to weigh inflation and output and show that empirical evidence supports an asymmetric preference hypothesis for output. We also find evidence that the monetary authority targets potential output in parallel to Barro and Gordon (1983).

The goal of this article is to explain why central banks undershoot their inflation targets as we can observe also in the case of the Czech Republic. In other words, I am trying to find out if this undershooting is due to unpredictable desinflation shocks or due to asymmetric behaviour of...

This paper analyzes empirically the impact of fiscal policy on the price level for Germany and Spain. We investigate, whether the fiscal theory of the price level (FTPL) is able to deliver a reasonable explanation for the different evolutions of the price levels in these two countries during...

We study discretionary equilibria in dynamic linear-quadratic rational expectations models. In contrast to the assumptions that pervade this literature we show that these models do have multiple equilibria in some situations. We demonstrate the existence of multiple discretionary equilibria by...

Using the most important criteria that should be taken into account when a monetary policy strategy is changed, this paper assess the opportunity of changing the status quo of the monetary policy in Romania with the inflation targeting monetary policy framework in 2005. The paper identifies the...

The uniqueness of bounded local equilibria under interest rate rules is analyzed in a model with sticky information à la Mankiw and Reis (2002). The main results are tighter bounds on monetary policy than in sticky-price models, irrelevance ofthe degree of output-gap targeting for determinacy,...

Modern Monetary Theory (MMT) has recently received significant at- tention in academic and policy circles. Critics question the sustainability of MMT-prescribed approaches to fiscal and monetary policy, especially over extended periods of time, in the presence of international financial markets,...