In this paper, we used modified multivariate EGARCH-M models to assess the relation between the equity risk premium, macroeconomic risk, and inflationary expectations. To rationalise this link between equity risk premia and macroeconomic volatilities, we built our empirical study on the...

First estimates of trade account statistics attract quite some attention in the media as they contain substantial information on recent economic developments. It is well known, however, that subsequent revisions of in particular this series can sometimes have substantial consequences for ex post...

The Cagan monetary model of hyperinflation has a relatively simple structure and a rich set of solutions. However, the wealth of possible solutions of this model does not constitute an asset for it. The introduction of rational expectations into the model was often at the origin of these...

Emprical studies of hyperinflations reveal that the rational expectations hypothesis fails to hold. To address this issue, we study a model of hyperinflation and learning in an attempt to better understand the volatility in movements of expectations, money, and prices. The findings surprisingly...

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Czech Republic, Hungary and Poland will have to join the European and Monetary Union. Surprisingly, there is very little work on the welfare consequences of the loss of monetary policy flexibility for these countries. This paper fills this void by providing a framework to evaluate quantitatively...

Models in which pricing decisions depend on indexing or rule of thumb behaviour have become prominent in the monetary policy literature and tend to match macroeconomic data well given their prediction of inflation persistence. The extent to which firms index their prices to past inflation has...

This paper re-examines the impact that paying interest on reserves has on price level indeterminacy, price level volatility, and overall economic well-being. Unlike previous papers which examined these issues, the model developed in this paper allows the return on reserves to equal the return on...

Labour market friction is viewed as the Tobin’s Q of an employed worker as opposed to the position of the Beveridge curve. This Tobin’s Q is inversely proportional to the average quality of the match between employers and workers. Based on this measure, I find that the labour...

The focus of this paper is on the leading indicator properties of high-yield corporate spreads regarding the level of real economic activity. This is motivated by both the financial accelerator mechanism underlying business cycle fluctuations as suggested by Bernanke and Gertler (1989). We...