For many years after the seminal work of the Meese and Rogoff (1983a), conventional wisdom held that exchange rates could not be forecast from monetary fundamentals. Monetary models of exchange rate determination were generally unable to beat even a naïve no-change model in out-of-sample forecasting. More recently, the use of sophisticated econometric techniques, panel data, and long spans of d...

This paper investigates global term structure dynamics using a Bayesian hierarchical factor model augmented with macroeconomic fundamentals. More than half of the variation in bond yields of seven advanced economies is due to global co-movement, which is mainly attributed to shocks to non-fundamentals. Global fundamentals, especially global inflation, affect yields through a ‘policy channel’ an...

Purpose: This study aims to look at the monetary system from an Islamic perspective.Design/Method/Approach: research is literature using a qualitative approach and descriptive methods related discussion.Findings: The results of indicate that it necessary abolish interest system, increase investment, maximize zakat instruments, others regarding cross-subsidies or bridges between rich poor, besid...

Whether a monetary policy (rule) aiming at stabilizing the economy efficiently should take exchange rate movements into consideration is an issue that recently has drawn a lot of attention. So far, however, no persuasive empirical evidence on the topic has been provided. Using well-established long-run economic equilibrium conditions building on traditional monetary views and by using cointegra...

This paper studies optimal monetary policy and central bank transparency in an economy where firms set prices under informational frictions. The economy is subject to two types of shocks which determine the efficient level of output and the firms’ desired mark-up. To minimize the welfare-reducing output gap and price dispersion among the firms, the central bank controls the firms’ incentives an...

Article history: Received 11 October 2012 Received in revised form 3 November 2014 Accepted 3 November 2014 Available online 11 November 2014 In this paper, we investigate the dynamic response of stock market volatility to changes in monetary policy. Using a vector autoregressive model, our findings reveal a significant response of stock returns and volatility to monetary policy shocks. While t...

It is believed that a common monetary policy in a monetary union will have identical effects on different countries as long as these countries have identical fundamentals. We show that, when there is specialization in production, the terms of trade react to the shock. The transmission mechanism of a monetary shock has in this case an additional channel, the terms of trade. This is the case even...