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Forecasting output and inflation: The role of asset prices
 Journal of Economic Literature
, 2003
"... Because asset prices are forwardlooking, they constitute a class of potentially useful predictors of inflation and output growth. The premise that interest rates and asset ..."
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Cited by 234 (0 self)
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Because asset prices are forwardlooking, they constitute a class of potentially useful predictors of inflation and output growth. The premise that interest rates and asset
The Band Pass Filter
, 1999
"... The 'ideal' band pass filter can be used to isolate the component of a time series that lies within a particular band of frequencies. However, applying this filter requires a dataset of infinite length. In practice, some sort of approximation is needed. Using projections, we derive approxi ..."
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Cited by 98 (2 self)
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The 'ideal' band pass filter can be used to isolate the component of a time series that lies within a particular band of frequencies. However, applying this filter requires a dataset of infinite length. In practice, some sort of approximation is needed. Using projections, we derive approximations that are optimal when the time series representations underlying the raw data have a unit root, or are stationary about a trend. We identify one approximation which, though it is only optimal for one particular time series representation, nevertheless works well for standard macroeconomic time series. To illustrate the use of this approximation, we use it to characterize the change in the nature of the Phillips curve and the moneyinflation relation before and after the 1960s. We find that there is surprisingly little change in the Phillips curve and substantial change in money growthinflation relation.
Are Oil Shocks Inflationary? Asymmetric and Nonlinear Specifications versus Changes in Regime
 Journal of Money, Credit and Banking
, 1999
"... This paper estimates the effects of oil price changes on U.S. inflation in a Phillips curve framework, allowing for some of the asymmetries, nonlinearities, and structural breaks that have been found in the literature on the real effects of oil price shocks. It finds that since around 1980, oil pric ..."
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Cited by 87 (0 self)
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This paper estimates the effects of oil price changes on U.S. inflation in a Phillips curve framework, allowing for some of the asymmetries, nonlinearities, and structural breaks that have been found in the literature on the real effects of oil price shocks. It finds that since around 1980, oil price changes seem to affect inflation only through their direct share in a price index, with little or no passthrough into core measures, while before 1980 oil shocks contributed substantially to core inflation. This structuralbreak characterization appears robust to a variety of respecifications, and to fit the data better than asymmetric and nonlinear oil price alternatives. Preliminary evidence suggests that a change in the reaction of monetary policy to oil shocks is part of the explanation. * The views expressed are those of the author and do not necessarily represent those of the Federal Reserve Board. I thank Bill English, Chris Hanes, Bill Nelson, and Robert Rich for helpful comments and suggestions. 1.
Monetary Policy for Inattentive Economies
"... This paper is a contribution to the analysis of optimal monetary policy. It begins with a critical assessment of the existing literature, arguing that most work is based on implausible models of inflationoutput dynamics. It then suggests that this problem may be solved with some recent behavioral m ..."
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Cited by 85 (8 self)
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This paper is a contribution to the analysis of optimal monetary policy. It begins with a critical assessment of the existing literature, arguing that most work is based on implausible models of inflationoutput dynamics. It then suggests that this problem may be solved with some recent behavioral models, which assume that price setters are slow to incorporate macroeconomic information into the prices they set. A specific such model is developed and used to derive optimal policy. In response to shocks to productivity and aggregate demand, optimal policy is price level targeting. Base drift in the price level, which is implicit in the inflation targeting regimes currently used in many central banks, is not desirable in this model. When shocks to desired markups are added, optimal policy is flexible targeting of the price level. That is, the central bank should allow the price level to deviate from its target for a while in response to these supply shocks, but it should eventually return the price level to its target path. Optimal policy can also be described as an elastic price standard: the central bank allows the price level to deviate from its target when output is expected to deviate from its natural rate.
Monetary Policy and Uncertainty about the Natural Unemployment Rate
, 1998
"... Recent empirical research concerning the relationship between in ation and unemployment, a relationship that is central to the design of monetary policy, has been characterized by an active debate about the precision of relevant parameter estimates such as the estimated natural unemployment rate. Th ..."
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Cited by 70 (6 self)
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Recent empirical research concerning the relationship between in ation and unemployment, a relationship that is central to the design of monetary policy, has been characterized by an active debate about the precision of relevant parameter estimates such as the estimated natural unemployment rate. This paper studies the optimal monetary policy in the presence of uncertainty about the natural rate and the shortrun in ationunemployment tradeo in a simple macroeconomic model. Two con icting motives drive the optimal policy. In the static version of the model, uncertainty provides a motive for the policymaker to move more cautiously than she would if she knew the true parameters. In the dynamic version, uncertainty also motivates an element of experimentation in policy. I nd that the optimal policy that balances the cautionary and activist motives typically exhibits gradualism, i.e. it is less aggressive than a policy that disregards parameter uncertainty. Exceptions occur when uncertainty isvery high and in ation close to target.
Forecasting In‡ation
 Journal of Monetary Economics
, 1999
"... This paper investigates forecasts of US in#ation at the 12month horizon. The starting point is the conventional unemployment rate Phillips curve, which is examined in a simulated outofsample forecasting framework. In#ation forecasts produced by the Phillips curve generally have been more accurate ..."
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Cited by 58 (3 self)
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This paper investigates forecasts of US in#ation at the 12month horizon. The starting point is the conventional unemployment rate Phillips curve, which is examined in a simulated outofsample forecasting framework. In#ation forecasts produced by the Phillips curve generally have been more accurate than forecasts based on other macroeconomic variables, including interest rates, money and commodity prices. These forecasts can however be improved upon using a generalized Phillips curve based on measures of real aggregate activity other than unemployment, especially a new index of aggregate activity
THE CONCEPT, POLICY USE AND MEASUREMENT OF STRUCTURAL UNEMPLOYMENT: ESTIMATING A TIME VARYING NAIRU ACROSS 21 OECD COUNTRIES
, 2000
"... The structural rate of unemployment and associated nonaccelerating inflation rate of unemployment (the NAIRU) are of major importance to the analysis of macro and structural economic developments, although in practice these concepts are not well defined and there is considerable uncertainty and co ..."
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Cited by 49 (1 self)
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The structural rate of unemployment and associated nonaccelerating inflation rate of unemployment (the NAIRU) are of major importance to the analysis of macro and structural economic developments, although in practice these concepts are not well defined and there is considerable uncertainty and controversy concerning their measurement and policy use. The present paper reviews a range of conceptual and analytical issues and related empirical studies to examine the usefulness and limitations of such concepts. A reducedform Phillips curve approach is found the most suitable conceptual framework for representing the NAIRU as currently used by the OECD in its policy analysis and surveillance work. Three distinct classes of NAIRU concept are identified, distinguished by the timeframe in which they are defined, which map directly into the broad requirements for macro and structural policy analysis. In line with a number of recent empirical studies, this general approach is applied across the 21 OECD member countries, using methods which combine the estimation of reducedform Phillips curve equations for each country using alternative filtering methods which allow the identification of timevarying NAIRU indicators.
2007): “Monetary policy when potential output is uncertain: Understanding the growth gamble of the 1990s
 Journal of Monetary Economics
"... Mankiw, David Romer, Glenn Rudebusch, an anonymous referee, the editor and participants in the NBER Monetary Economics program meeting for very helpful comments. We thank Randell Moore for providing us with the Blue Chip forecasts and Refer Gürkaynak, Brian Sack, and Eric Swanson for providing us wi ..."
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Cited by 45 (7 self)
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Mankiw, David Romer, Glenn Rudebusch, an anonymous referee, the editor and participants in the NBER Monetary Economics program meeting for very helpful comments. We thank Randell Moore for providing us with the Blue Chip forecasts and Refer Gürkaynak, Brian Sack, and Eric Swanson for providing us with their data on forward rates.
2011a): "The Return of the Wage Phillips Curve
 Journal of the European Economic Association
"... The standard New Keynesian model with staggered wage setting is shown to imply a simple dynamic relation between wage inflation and unemployment. Under some assumptions, that relation takes a form similar to that found in empirical applications—starting with the original Phillips (1958) curve—and ma ..."
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Cited by 32 (4 self)
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The standard New Keynesian model with staggered wage setting is shown to imply a simple dynamic relation between wage inflation and unemployment. Under some assumptions, that relation takes a form similar to that found in empirical applications—starting with the original Phillips (1958) curve—and may thus be viewed as providing some theoretical foundations to the latter. The structural wage equation derived here is shown to account reasonably well for the comovement of wage inflation and the unemployment rate in the U.S. economy, even under the strong assumption of a constant natural rate of unemployment.
Errors in the measurement of the output gap and the design of monetary policy
 Journal of Economics and
, 2000
"... We exploit data on historical revisions to realtime estimates of the output gap to examine the implications of measurement error for the design of monetary policy, using the Federal Reserve’s model of the U.S. economy, FRB/US. Measurement error brings about a substantial deterioration in economic p ..."
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Cited by 27 (7 self)
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We exploit data on historical revisions to realtime estimates of the output gap to examine the implications of measurement error for the design of monetary policy, using the Federal Reserve’s model of the U.S. economy, FRB/US. Measurement error brings about a substantial deterioration in economic performance, although the problem can be mitigated somewhat by reducing the coefficient on the output gap in policy rules. We also show that it is usually optimal to place some weight on the level of the output gap in the conduct of policy, but under extreme conditions it may be preferable to focus on output growth.