7 Works

A Horse Race of Monetary Policy Regimes: An Experimental Investigation

Olena Kostyshyna, Luba Petersen & Jing Yang
Monetary policy has evolved significantly in the aftermath of the global financial crisis and the COVID-19 pandemic. Alternative approaches such as average inflation targeting (AIT), price-level targeting (PLT) and nominal GDP-level targeting (NGDP) have gained attention in academic and policy discussions. These history-dependent regimes can be powerful and effective in stabilizing an economy because the central bank has to make up for past misses. However, their performance depends on forward-looking expectations and people’s understanding of...

Identification of Random Resource Shares in Collective Households Without Preference Similarity Restrictions

Geoffrey Dunbar, Arthur Lewbel & Krishna Pendakur
Resource shares, defined as the fraction of total household spending going to each person in a household, are important for assessing individual material well-being, inequality and poverty. They are difficult to identify because consumption is measured typically at the household level, and many goods are jointly consumed, so that individual-level consumption in multi-person households is not directly observed. We consider random resource shares, which vary across observationally identical households. We provide theorems that identify the...

Inflation Expectations and Learning about Monetary Policy

David Andolfatto, Scott Hendry & Kevin Moran
Various measures indicate that inflation expectations evolve sluggishly relative to actual inflation. In addition, they often fail conventional tests of unbiasedness. These observations are sometimes interpreted as evidence against rational expectations. The authors embed, within a standard monetary dynamic stochastic general-equilibrium model, an information friction and a learning mechanism regarding the interest-rate-targeting rule that monetary policy authorities follow. The learning mechanism enables optimizing economic agents to distinguish between transitory shocks to the policy rule and...

Fostering Health Literacy and Social Media in a Higher Education Setting

Sandra Vamos & Paul Yeung

Adoption of a New Payment Method: Theory and Experimental Evidence

Jasmina Arifovic, John Duffy & Janet Hua Jiang
We model the introduction of a new payment method, e.g., e-money, that competes with an existing payment method, e.g., cash. The new payment method involves relatively lower per-transaction costs for both buyers and sellers, but sellers must pay a fixed fee to accept the new payment method. As a result of the network effects, our model admits two symmetric pure strategy Nash equilibria. In one equilibrium, the new payment method is not adopted and all...

Managing Adverse Dependence for Portfolios of Collateral in Financial Infrastructures

Alejandro Garcia & Ramazan Gençay
We propose a framework that allows a portfolio manager to quantify the probability of simultaneous losses in multiple assets of a collateral portfolio. Using this framework, we propose a methodology to conduct stress tests on the market value of the portfolio of collateral when undesirable extreme dependence occurs. This framework permits us to quantify the potential impact on the portfolio returns of systemic events that change, or 'break down', the historical comovement structure, imposing an...

Labour Markets, Liquidity, and Monetary Policy Regimes

David Andolfatto, Scott Hendry & Kevin Moran
We develop an equilibrium model of the monetary policy transmission mechanism that highlights information frictions in the market for money and search frictions in the market for labour. A change in monetary policy regime, modelled here as an exogenous reduction in the long-run target for the money-growth rate, results in a large and persistent increase in the interest rate owing to a persistent shortfall in liquidity. This persistent liquidity effect occurs because of the limited...

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