This paper presents the optimal strategic asset allocation for investors seeking to hedge inflation risk. Using a vector-autoregressive model, we investigate the optimal choice for an investor with a fixed target real return at different horizons, with shortfall probability constraint. We show that the strategic allocation differs sharply across regimes. In a volatile macroeconomic environment,...

Housing is an important component of the consumption basket. Since both rental prices and goods prices are sticky, the literature suggests that optimal monetary policy should stabilize both types of prices, with the optimal weight on rental inflation proportional to the housing expenditure share. In a two-sector DSGE model with sticky rental prices and goods prices, however, we find that the op...

This paper analyses the optimal frequency for Central Bank evaluation in an inflation-targeting regime, applied to the Brazilian economy. Setting a frequency of accountability is an important issue in the design of an inflation-targeting regime, since it allows the matching of conflicting targets between the monetary authority and the government: while the government cares about inflation and e...

A bidirectional ultrasonic Doppler flowmeter with direct single sideband separation was used to measure blood flow in the femoral and dorsalis pedis arteries of 18 normal volunteers. Changes in blood-flow velocity and volume during external counterpulsation (ECP) with various sustaining times (the time for maintaining pressure) for inflation were studied. The results showed that blood-flow velo...

Optimal Price Indices for Targeting Inflation under Incomplete Markets In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. In this paper, we develop a twosector two-good closed economy new Keynesian model to study the optimal choice of price index in markets with financial frictions. Financial frict...

In this paper we investigate the link between optimal level of leverage and macroeconomic uncertainty. Using the model of firm’s value maximization, we show that as macroeconomic uncertainty increases, captured by an increase in the variability of industrial production or inflation, firms decrease their optimal levels of borrowing. We test this prediction on a panel of non–financial US firms dr...

We adopt mechanism design to study the long-run consequences of inflation on aggregate output, trade, and welfare. Our theory captures multiple channels for individuals to respond to the inflation tax: search intensity (the intensive margin), market participation (the extensive margin), and substitution between money and a higher return asset. To determine the terms of trade in pairwise meeting...

economic development plans normally contain some policy objectives, especially for the most important macroeconomic variables. governments are expected to take best policies to achieve these objectives, although due to some structural or other impediments they may fail to touch the objectives. we have attempted to uncover the determinants of private consumption and investment as the objectives ...

We consider optimal monetary stabilization policy in a New Keynesian model with explicit microfoundations, when the central bank recognizes that private-sector expectations need not be precisely model-consistent, and wishes to choose a policy that will be as good as possible in the case of any beliefs close enough to model-consistency. We show how to characterize robustly optimal policy without...