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Trends, cycles, and convergence
Determining turning points in the business cycle is a difficult problem. Making sensible predictions concerning the growth path of an economy in the medium or long term is even harder. This paper explores what can be achieved by analysing and modeling time series observations on gross domestic product ...
International aspects of the zero lower bound constraint
Large negative aggregate demand shocks can drive down an economy’s equilibrium real interest rate and if the central bank is committed to stabilizing inflation monetary policy may be hampered by the zero lower bound on nominal interest rates –the economy may be in a 'liquidity trap.' The policy dilemma ...
Modeling a housing and mortgage crisis
The current crisis has centered on borrower defaults on mortgages and the associated effects on banks’ own credit standing (and in several cases their own default), which in turn led to tightened conditions for lending to new (mortgage) borrowers. Any model that does not incorporate all or most of ...
Comfort in floating: taking stock of twenty years of freely floating exchange rate in Chile
Chile offers an example of a country that has overcome the fear of floating by reducing balance-sheet mismatches; enhancing financial-market development; and improving monetary, fiscal, and political institutions; while strengthening policy...
KFstar and portfolio inflows: a focus on Latin America
Policymakers faced with volatile capital flows may desire a method to identify the level of flows likely to persist in the medium
run. In a series of papers (Burger, Warnock, and Warnock, henceforth BWW, 2018, 2022), we have developed an estimate of the natural or equilibrium level of capital flows ...
Changing inflation dynamics, evolving monetary policy
Empirical models have failed to explain inflation behavior over the last 20 years in most developed economies. The unusual inflation dynamics—the ‘missing deflation’ during recessions and the ‘missing inflation’ during recoveries—points to a failure of Phillips curve predictions. Several hypotheses ...
Leverage restrictions in a business cycle model
We seek to develop a business cycle model with a financial sector which can be used to study the consequences of policies to restrict the leverage of financial institutions (banks). Because we wish the model to be consistent with basic features of business cycle data we introduce our banking system ...
Monetary policy and key unobservables: evidence from large industrial and selected inflation-targeting countries
In recent years, the design of monetary policy has focused on gaps—the output gap, the interest rate gap, and the unemployment rate gap have all played a role in policy discussions. Standard models used for policy analysis are either specified in terms of such gaps or imply important roles for these ...
Imperfect labor mobility, urban unemployment and agricultural trade reform in Chile
A component of agricultural policy in Chile is the use of price bands to stabilize domestic price movements in selected agricultural crops and processed agricultural commodities. In the 1990s, the use of price bands for wheat, fats and oils, and sugar resulted in the equivalent of roughly a 22 percent ...
Macroeconomic and monetary policies from the eductive viewpoint
The quality of the coordination of expectations, a key issue for monetary policy, obtains from different, but interrelated, channels: both the credibility of the central bank intervention and the ability of decentralized agents to coordinate on a dynamical equilibrium matter. For both purposes, it is ...