This paper provides parametric estimates of technical change, e¢ ciency change, economies of scale, and total factor productivity growth for large banks (those with assets in excess of $1 billion) in the United States, over the period from 2000 to 2005. In doing so, we propose a distance function based primal total factor productivity growth index, which is valid under both perfect and imperfec...

Price level targeting (without base drift) and in‡ation targeting (with base drift) are compared with persistence in output (generated by sticky prices, for instance). Counter to conventional wisdom, price level targeting results in lower short-run in‡ation variability than in‡ation targeting (if output is at least moderately persistent). Price level targeting also eliminates any average in‡ati...

This paper examines the predictive content of several macroeconomic variables for the decisions of the Federal Open Market Committee (FOMC) to change its target for the Federal funds rate. To take the discrete nature of the target changes and their serial dependence into account we develop forecasting procedures that are based on dynamic extensions of a multinomial logit model. We …nd that the ...

This paper investigates the disinflation experiences of three countries, Australia, Canada and New Zealand. Unlike previous approaches which have sought to use institutional data to pre-determine the causes, speed and duration of the transitions to low inflation regimes this paper allows price data itself to determine the speed and timing of the reforms using smooth transition analysis. The res...

Financial Globalization and Monetary Policy* The process of financial globalization has significantly altered the environment in which national monetary policy authorities operate. What implications does this have for the design of monetary policy? The question can be properly addressed only in the context of a model where monetary policy interacts with financial market efficiency. This paper i...

It is widely acknowledged that the Fed can control the average inflation rate over a period of time reasonably well. Because of this and the Federal Open Market Committee’s (FOMC’s) long-standing commitment to price stability, the author argues that the FOMC has an implicit long-run inflation objective (LIO)—lower and upper bounds to the long-run inflation rate. He shows that the statements mad...

We use Bayesian time-varying parameters VARs with stochastic volatility to investigate changes in the marginal predictive content of the yield spread for output growth in the United States and the United Kingdom, since the Gold Standard era, and in the Eurozone, Canada, and Australia over the post-WWII period. Overall, our evidence does not provide much support for either of the two dominant ex...

Article history: Received 8 August 2012 Received in revised form 18 June 2014 Accepted 1 July 2014 Available online 9 July 2014 This paper examines how stock market liquidity and commonality in liquidity are impacted by real-time output gap and inflation, as these macroeconomic variables have been shown to be the main drivers of monetary policy according to the Taylor rule. We show that an incr...

In this paper we study dollarization as a commitment device that the Central Bank could use to avoid getting involved in an undesirable banking-sector bailout. We show how a political process could induce an equilibrium outcome that differs from the one that a benevolent Central Bank would want to implement. Dollarization then could be used to restore the economy to the benevolent outcome. In s...

Progressive labor income taxation in an otherwise standard NK model: (i) introduces a trade-o¤ between output and in‡ation stabilization; (ii) enlarges the determinacy region in the parameter space, substantially altering the so-called Taylor principle; (iii) has non-linear dynamic e¤ects and changes the responses of the economy to a technology and to a government spending shock; (iv) sensibly ...