Conventionally, consumer price indices are constructed on the assumption that we are observing a stable system of consumer demand, and that all price movements are, therefore, the result of supply-side changes. This often leads to an emphasis on consumer price substitution and to a...

In this paper, we show that traditional comparisons of Mean Squared Prediction Error (MSPE) between two competing forecasts may be highly controversial. This is so because when some specific conditions of efficiency are not met, the forecast displaying the lowest MSPE will also display the...

This paper explores the optimal design of monetary policy in a multisector model where agents' preferences are non-homothetic. Non-homotheticity derives from the existence of a minimum consumption requirement for food, which households need to satisfy for subsistence. We find that the...

We use micro level retail price data from convenience stores to study the link between 0-ending price points and price rigidity during a period of a runaway inflation, when the annual inflation rate was in the range of 60%–430%. Surprisingly, we find that 0-ending prices are less likely to...

This paper studies state-dependent effects of monetary policy shocks. I first consider state-dependence of policy actions in a simple static model. The model predicts that effectiveness of monetary policy is positively related to the level of output. I next use an estimated DSGE model to...

This paper explores relative price convergence for 18 cities in Turkey. The convergence implies stationarity in the long run. Henceforth, to observe whether price convergence occurs or not, this study conducts unit root tests following Lee and Strazicich (2003) with two structural breaks in...

This study empirically examines the nexus among budget deficit, money supply and inflation by using a monthly data set from January 1995 to December 2012 and a SVAR model with five endogenous variables, inflation, money growth, budget deficit growth, real GDP growth and interest rate. Since real...

The main objective of this study is to investigate the long run trade-off between unemployment and inflation in Egypt through the period (1974-2011) using Johansen-Juselius (1990) cointegration test and Vector Error Correction Model (VECM). Results of ADF test indicate that both series are...

This paper studies the effects that conventional and unconventional monetary policies generate when endogenous growth, trend inflation and financial frictions are considered in a New Keynesian macroeconomic model. Financial variables play a key role in the determination of the steady state...

This study adopts a loanable funds model to investigate the impact of budget deficits in the U.S. on long term real interest rates. The study investigates both ex post real 10 year Treasury note yields and ex post real 20 year Treasury bond yields. The study period runs from 1955 through 1987,...