This paper studies the relationship between inflation, output, money and interest rates in the euro area, using data spanning 1980–2000. The P model is shown to have considerable empirical support. Thus, the “price gap” or, equivalently, the “real money gap” (the gap between current real balances and long-run equilibrium real balances), has substantial predictive power for future inflation. The...

This paper empirically analyzes the non-monotonic influence that interest rate changes have on irreversible investment in income producing properties. Using the complete history of quarterly capital improvements for 1,416 commercial properties over the 1978 to 2009 period, we find strong evidence of the non-monotonic effect for apartment, office, and retail properties, but not for industrial pr...

This paper investigates whether the funding behaviour of euro area debt management offices (DMOs) changed with start ECB’s Public Sector Purchase Programme (PSPP). Our results show that (i) lower yield levels and (ii) PSPP purchases supported higher maturities at issuance. The former indicates a “locking in low rates for longer”, while latter suggests existence an additional “demand effect” on ...

The author of this article draws special attention to two particular claims the free bankers concerning supposed working characteristics a fractional-reserve banking system which may strike reader as questionable. first these relates alleged absence real-balance effect under banking. second bankers’ reference Walras’ Law providing rationale for system’s «offsetting» actions when confronted with...

We present a simple menu cost model which explains the finding that firms are more likely to adjust prices upward than downward. Asymmetric adjustment to shocks arises naturally, even without trend inflation, from the desire of firms to keep industry prices as high as is sustainable and the non-convexity due to menu costs. It implies that aggregate demand shocks have asymmetric effects — negati...

This paper examines a simple monetary optimizing model with sticky-prices. Two types of monetary policy rules are considered: constant money growth rules and interest-rate feedback (Taylor-type) rules. In the case of constant money growth rules, we show the existence of limit cycles through the Hopf bifurcation theorem. On the other hand, in the case of the interest-rate feedback rules, we show...

abstract today, debt stabilization in an uncertain environment is an important issue. in particular, the question how fiscal and monetary authorities should deal with this uncertainty is of much importance. especially for some developing countries such as iran, in which on average 60 percent of government revenues comes from oil, and consequently uncertainty about oil prices has a large effect ...

This paper studies whether the central bank should adjust its inflation target to account for the systematic upward bias in measured inflation due to quality improvements in consumption goods. We show that the answer to this question depends on what prices are assumed to be sticky. If nonquality-adjusted prices are assumed to be sticky, then the inflation target should not be corrected. If, on ...

We examine global dynamics under infinite-horizon learning in New Keynesian models where monetary policy practices either pricelevel or nominal GDP targeting and compare these regimes to inflation targeting. These interest-rate rules are subject to the zero lower bound. Robustness of the three rules in learning adjustment are compared using criteria for the domain of attraction of the targeted ...

This paper examines the impact of public information in an economy where agents also have diverse private information. Since disclosures by central banks are an important source of public information, we are able to assess how the words of central bankers shape expectations, in addition to their actions. In an otherwise standard macro model, the disproportionate role of public information degra...