In this paper we study the role of the exchange rate in conducting monetary policy in an economy with near-zero nominal interest rates as experienced in Japan since the mid-1990s. Our analysis is based on an estimated model of Japan, the United States and the euro area with rational expectations and nominal rigidities. First, we provide a quantitative analysis of the impact of the zero bound on...

We use the inflation premium—the difference between nominal and real interest rates—as a proxy for expected inflation in the context of the New Keynesian Phillips Curve. Using data from inflation-indexed and nominal bonds we estimate a forward-looking Phillips curve for the United Kingdom over the period 1985-2004. The proposed model describes UK inflation dynamics considerably better than does...

Price dynamics in Indian cities were examined using cointegration analysis. We identified and calculated a common trend for prices in 25 major cities in India. Impulse response functions were obtained to calculate the rates of convergence to the prices and we found that the half-life of any shock is very small for Indian cities. Although a close to three-month half-life seems too fast, there is...

This paper examines, for the Brazilian case, if break-even inflation rates (BEIR) extracted from fixed income securities is an unbiased estimator of consumer inflation, measured by the CPI. Our estimates suggest that BEIRs are informative about future inflation, especially for the maturity of three months. The main innovation of our work, however, is the method used for estimation, allowing us ...

This paper adopts a New Keynesian approach to analyze the relationship between nominal interest rates and prices. In this new framework, both a positive relation between interest rates and price levels (i.e., a positive Gibson effect) and a negative relation between interest rates and subsequent price changes (i.e., a negative Fama-Fisher effect) arise when money is supplied inelastically and p...

The interrelationship between house prices and mortgage credit has been one of the more compelling issues to warrant attention after the recent financial crisis. Considerable financial innovation and liberalisation of wholesale international funding markets over the past 20 years greatly increased the ability of banking sectors to extend credit to the real economy. Almost inevitably many countr...

We compare optimal and simple interest-rate rules. Our model features optimizing agents, monopolistic competition in both product and labor markets, and one-period nominal contracts (for wages alone or for both wages and prices) signed before shocks are known. Exact solutions ensure that we obtain correct welfare rankings. Optimal rules maximize the unconditional expected utility of the represe...

Using the statistical technique of fuzzy clustering, regimes of inflation and unemployment are explored for the United States, the United Kingdom and Germany between 1871 and 2009. We identify for each country three distinct regimes in inflation/unemployment space. There is considerable similarity across the countries in both the regimes themselves and in the timings of the transitions between ...

knowledge of the relationship between two phenomena (inflation and unemployment) is crucial to any economic and political decision-making process. an investigation of this relationship helps economists and policy-makers to be aware of the economy’s performance. in the present research, new-keynesians’ philips hybrid curve has been derived by using the pricing models and the assumption of price ...

one of the most important objectives of any economic system is to achieve to low and stable inflation and sustained economic growth. in this study, first, bayesian causal is indentified effective factors on inflation and then using bayesian causal network and determining prior probabilities and posterior probabilities in different scenarios,it is discussed the impacts of this factors on inflati...