The sacrifice ratio and core inflation

The existing body of research that measures the sacrifice ratio and the determinants of the sacrifice ratio has crucially identified several disinflation episodes across many different countries, while also overwhelmingly finding evidence in favor of the “cold-turkey” approach to disinflation. However all previous studies in this topic are based exclusively on headline measures of inflation. In this paper we investigate what happens if we instead use core inflation to both identify disinflation episodes and measure the sacrifice ratio. Several important differences emerge: for example, headline inflation produces more disinflation episodes than core inflation does – something which is particularly conspicuous during the Great Recession – and episodes that are generally shorter in length. We also find that the argument in favor of the cold-turkey approach to reducing inflation disappears when combining the use of core inflation with sacrifice ratio measures that allow for varying persistent effects on output of disinflation.     

Search efficiency,wage dynamics and welfare

Advances in information technology have improved the job-search process in the labor market. We analyze the effects of this improvement by constructing a search-and-matching model with two sectors: a risky sector with firm-specific productivity shocks and a risk-free sector. The risky sector is characterized by a low level of commitment between employers and workers – either party can end the employment relationship. We show that a better job-search process generates more job matches in the risky sector, and this benefits workers by improving their outside options. The effect on employers is subtle: while it is easier to fill vacancies, workers become more expensive. At the same time, the ease of finding new workers makes it harder for employers to keep their wage promises to workers and increases wage volatility. Our paper contributes to the literature by offering a novel explanation for the observed rise in wage volatility.     

TEN YEARS OF GENERAL OLIGOPOLISTIC EQUILIBRIUM: A SURVEY

In this paper, I survey the recent and rapidly increasing theoretical literature using the brand‐new approach in embedding oligopolistic competition in general equilibrium, as designed by J. Peter Neary. First, I introduce the reader to Neary's approach, by describing the main ingredients. Then, I present a comprehensive set of studies that, over the last decade, apply this approach in different contexts, most of which are in open economy, and I examine the relevant outcomes. Although the theoretical literature has generously advanced, there is a lack of research on the empirical side, which would be an important area for future research besides theoretical extensions, some of which I highlight in the conclusions.     

Forecasting using heterogeneous panels with cross-sectional dependence

In this paper, we focus on forecasting methods that use heterogeneous panels in the presence of cross-sectional dependence in terms of both spatial error dependence and common factors. We propose two main approaches to estimating the factor structure: a residuals-based approach, and an approach that uses a panel of auxiliary variables to extract the factors. Small sample properties of the proposed methods are investigated through Monte Carlo simulations and applied to predict house price inflation in OECD countries.     

Is the unemployment–inflation trade-off still alive in the Euro Area and its member countries? It seems so

The unemployment–inflation trade-off can be interpreted as a proposition concerning the response of these two variables to aggregate demand shocks. In this paper, we study the possible presence of the trade-off in the Euro Area and in a wide group of Euro-area countries in the last 20 years, that is, since the start of EMU. We use the structural VAR methodology that allows the separation between supply and demand shocks. Our main finding is that the existence of a trade-off is largely confirmed both at the Euro Area and at the national level. Nevertheless, the size of the trade-off, measured at different horizons, shows some heterogeneity among countries. No less important, when we augment the VAR model by introducing monetary policy in the context of an open economy, we find that monetary policy shocks push inflation and unemployment in opposite directions in the currency area. Another interesting result concerns the evidence of a relatively flat relation between unemployment and inflation, conditionally to monetary policy shocks. The bulk of these conclusions seem to be confirmed by a number of robustness checks.     

The Role of Inflation Target Adjustment in Stabilization Policy

How and under what circumstances can adjusting the inflation target serve as a stabilization-policy tool and contribute to welfare improvement? We answer these questions quantitatively with a standard New Keynesian model that includes cost-push-type shocks. Our proposed inflation target rule calls for the target to be adjusted in a persistent manner and in the opposite direction to the realization of a cost-push shock, which is essentially a makeup strategy. The inflation target rule, combined with a Taylor-type rule, significantly reduces inflation fluctuations originating from cost-push shocks and mitigates the stabilization trade-off, resulting in a similar level of welfare to that associated with the Ramsey optimal policy.     

Impact of macroeconomic surprises on the Brazilian yield curve and expected inflation

This study investigates how unexpected announcements in Brazilian and U.S. macroeconomic indicators affect the term structure of nominal interest rates, as well as implicit inflation expectations and real interest rates. Using daily data from March 2005 to December 2012, we employ an extended Vector Error Correction Model to take into account nonstationarity and the long-term equilibrium among different maturities of those curves. We found empirical evidence that macroeconomic surprises, domestic (Brazilian) and external (U.S. American), which lead the market to believe that there might be a higher risk of inflation or an overheated economy, raise nominal interest rates, implicit expected inflation and real interest rates. Surprisingly, in relation to the efficient-market hypothesis, we found that some macroeconomic surprises have a lagged effect on the yield curves. We also tested the impact of the global financial crisis of 2007–09 and found that the crisis affected significantly the direction and magnitude of the responses to macroeconomic news.     

Does Money Matter in Shaping Domestic Business Cycles? An International Investigation

We study the contribution of money to business‐cycle fluctuations in the United States, the United Kingdom, Japan, and the euro area using a small‐scale structural monetary business cycle model. Constrained likelihood‐based estimates of the parameters are provided and time instabilities analyzed. Real balances are statistically important for output and inflation fluctuations. Their contribution changes over time. Models giving money no role provide a distorted representation of the sources of cyclical fluctuations, of the transmission of shocks, and of the events of the last 40 years.     

城镇就业市场上劳动力工资扭曲程度测度

本文利用CHIPS2007数据库，基于随机前沿模型对我国城镇就业市场上劳动力的工资扭曲程度进行测度。研究结果表明：（1）在城镇就业市场上，由于工资扭曲现象的存在，劳动力实际获得的工资要比他们的边际生产率低45％～60％；（2）已婚、子女个数较少、本地、拥有失业保险、男性、大中型企业的劳动力工资扭曲程度要低于未婚、子女个数较多、外来、没有失业保险、女性、小型企业的劳动力；（3）中低工资水平的劳动力工资扭曲程度要比高工资水平的劳动力严重，且中低工资水平劳动力工资扭曲程度的方差更大。由此，本文提出推进就业市场的市场化改革，完善就业市场信息网络，从而减轻劳动力工资扭曲程度。     

Money demand and the role of monetary indicators in forecasting euro area inflation

This paper examines the stability of money demand and the forecasting performances of a broad monetary aggregate (M3), excess liquidity and excess inflation in predicting euro area inflation. The out-of sample forecasting performances are compared to a widely used alternative, the spread of interest rates. The results indicate that the evolution of M3 is still in line with money demand, even when observations from the economic and financial crisis are included. Both excess measures and the spread are useful for predicting inflation.