It is well known that increasing returns to scale and firms’ market power are two potential sources of sunspot expectations in Neoclassical models. In this paper we show that both the degree of returns to scale and market power can have fundamentally different implications for self-fulfilling expectations in New Keynesian models depending on the nature of price rigidity. As a result, the design...

A growing empirical and theoretical literature argues in favor of specifying monetary policy in the form of Taylor-type interest rate feedback rules. That is, rules whereby the nominal interest rate is set as an increasing function of inflation with a slope greater than one around an intended inflation target. This paper shows that because of the zero bound on nominal interest rates, such rules...

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...

Using Japanese scanner data of transaction prices and sales for more than 1,600 commodity groups from 1988 to 2008, we find a statistically significant negative correlation between the frequency of price changes and the degree of market concentration. We also find that structural factors of a distribution channel are significantly correlated with rigidity in retail prices. Decomposing the frequ...

In this paper, we characterize conditions under which interest rate feedback rules that set the nominal interest rate as an increasing function of the inflation rate induce aggregate instability by generating multiple equilibria. We show that these conditions depend not only on the monetaryfiscal regime (as emphasized in the fiscal theory of the price level) but also on the way in which money i...

Given the increasing importance of achieving low and stable inflation rate during the last decades, adopting the most suitable practices to implement monetary policies has always been of concern by monetary authorities of different countries. Inflation targeting (IT) regime is the most recent strategy to guide monetary policies that have been introduced following the occurrence of exchange rate...

Anatomy . . . . . . . . . . . . . . . . . . . . . . . e27 Nystagmus . . . . . . . . . . . . . . . . . . . . . . e31 Aetiology and classification of vertigo . . . . . . . e32 History . . . . . . . . . . . . . . . . . . . . . . . . e32 Clinical examination . . . . . . . . . . . . . . . . . e33 Interpretation of the examination . . . . . . . . . . e35 Therapy . . . . . . . . . . . . . . . . . . . ...

In this paper, we develop a two-sector DSGE model with infrequent purchases of durable goods and use it to address the following three issues. Does this model help explain the recent weak recovery? Can this model help resolve the absence of co-movement between durable and non-durable consumption? Is the dynamic behavior of this model similar with that of the (durable goods) stock adjustment-cos...

In this paper, we empirically investigate the relationship between oil price changes and output in a group of oil exporting countries. The dynamics of business cycles in Libya, Saudi Arabia, Nigeria, Kuwait, Venezuela and Qatar are modeled by alternative regime switching models. We show that the extension of uni-variate Markov Switching model in order to include oil revenue improves dating busi...

Asset-liability mismatch in balance sheet of banks shows serious challenges in banks because of the traditional methods of recording assets and liabilities at book value in Iran. The Central Bank of the country motivated and advised banks to take concrete steps in minimizing the mismatch in the asset-liability composition. This paper attempts to suggest a micro funded framework that can evaluat...