A popular model in the literature postulates an interest rate rule, a NAIRU price equation, and an aggregate demand equation in which aggregate demand depends on the real interest rate. In this model a positive inflation shock with the nominal interest rate held constant is explosive because it increases aggregate demand (because the real interest rate is lower), which increases inflation throu...

OBJECTIVES Illegal drug use continues to be a major threat to community health and safety. We used international drug surveillance databases to assess the relationship between multiple long-term estimates of illegal drug price and purity. DESIGN We systematically searched for longitudinal measures of illegal drug supply indicators to assess the long-term impact of enforcement-based supply red...

A reform of the Eurosystem's inferior monetary-policy strategy is increasingly urgent, as noted by a number of observers. For instance, a recent extensive CEPR report finds the that the prominent first pillar of the Eurosystem's strategy, the money-growth indicator, " looks increasingly ridiculous, giving perverse signals that the ECB probably ignores " , and that it is " flawed beyond repair–b...

This paper provides a review of the concept of core inflation and evaluates the performance of several proposed measures. We first consider the rationale of a central bank in setting its inflation goal in terms of a selected rate of consumer price growth and the use of a core inflation measure as a means of achieving this long-term policy objective. We then discuss desired attributes of a core ...

In recent years, a broad academic consensus has arisen around the use of rational expectations sticky-price models to capture inflation dynamics. These models are seen as providing an empirically reasonable characterization of observed inflation behavior once suitable measures of the output gap are chosen; and, moreover, are perceived to be robust to the Lucas critique in a way that earlier eco...

We study the implications of trend inflation for an economy’s long-run growth rate. To do so, we extend a New Keynesian model to allow for endogenous growth. The defining characteristic of the New Keynesian framework is that inflation and nominal price stickiness together induce relative price dispersion and thus reduce monopoly profits. When the framework is embedded in an endogenous growth mo...

This paper develops a small open economy, sticky-price model with a role for current account dynamics in the transmission of shocks. I solve the stationarity problem of incomplete markets, open economy models by adopting an overlapping-generations structure. I model nominal rigidity by assuming that firms face costs of output price inflation volatility. Markup dynamics affect labor demand and i...

Abstract This study investigates the empirical validity of the variability hypothesis in Turkey for the period of February 2005-November 2015, by using cross-sectional relative price data and by focusing on the assumptions of linearity and stability. The linearity assumption between the two variables is ensured by estimating quadratic regression equation. The assumption of stability is secur...

In many economies, commodity price volatility is one of the sources of signaling to market players. Different experiences of price shocks have led economists to reconsider price shocks. Considering the effects of monetary policy on the inflation rate, the present study investigates the impact of monetary policy shock on the price of storable food commodities. In this regard, data for 2006: 01 t...

In the United States, eradication of persistent federal deficits has won broad bipartisan support. At the same time, political pressures have mounted to strengthen the Federal Reserve's explicit concern with price stability. Proposals under consideration would require a much narrower focus on the part of Fed policymakers, and could be interpreted as targeting the price level rather than a negli...