oil price uncertainty and the canadian economy evidence from a varma garch in mean asymmetric bekk model abstract in this paper we build on recent work by elder and serletis 2010 forthcoming and rahman and serletis forthcoming and investigate the relationship between oil price uncertainty and the level of economic activity using quarterly canadian data over the period from 1974 1 to 2010 1 in doing so we use a bivariate varma garch in mean asymmetric bekk model as detailed in engle and kroner 1995 grier et al 2004 and shields et al 2005 we show that the conditional variance covariance process underlying output growth and the change in the real price of oil exhibits significant non diagonality and asymmetry we also present evidence that increased uncertainty about the change in the real price of oil is associated with a lower average growth rate of real economic activity in canada consistent with the results in elder and serletis 2010 forthcoming and rahman and serletis forthcoming for the united states and elder and serletis 2009 for canada our results are robust to alternative measures of the price of oil alternative measures of the level of economic activity and alternative data frequencies

the federal funds rate and the channels of monetary transmission the authors show that the interest rate on federal funds is extremely informative about future movements of real macroeconomic variables then they argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves that is the funds rate is a good indicator of monetary policy actions finally using innovations to the funds rate as a measure of changes in policy the authors present evidence consistent with the view that monetary policy works at least in part through credit i e bank loans as well as through money i e bank deposits copyright 1992 by american economic association

inflation uncertainty and growth in a cash in advance economy abstract this paper analyzes the effects of inflation variability on economic growth in a model where money is introduced via a cash in advance constraint in this setting we find that inflation adversely affects long run growth even when the cash in advance constraint applies only to consumption at the same time we find that inflation and growth are positively related in the short run furthermore variability increases average growth through a precautionary savings motive since inflation and inflation variability tend to be highly correlated the presence of uncertainty attenuates the negative long run relationship between inflation and real growth it also provides a partial rationale for the apparent lack of robustness in cross country regressions of growth and inflation

circles within a circle the condition for the possibility of ethical business institutions within a market system how can a business institution function as an ethical institution within a wider system if the context of the wider system is inherently unethical if the primary goal of an institution no matter how ethical it sets out to be is to function successfully within a market system how can it reconcile making a profit and keeping its ethical goals intact while it has been argued that some ethical businesses do exist e g johnson and johnson the argument i would like to put forth is that no matter how ethical a business institution is or how ethical its goals are its capacity to act in an ethical manner is restricted by the wider system in which it must operate the market system unless there is a fundamental change in the notion of the market system itself the capacity for individual businesses to act in an ethical manner will always be restricted my argument is divided into two parts the first part is to show the inherent bias towards unethical outcomes that is inherent in the market system the second part is to suggest how to reorient the general economic framework in order to make ethical institutions more possible the question then becomes how to define economic behavior in terms other than competition for profit

consensus consumer and intertemporal asset pricing with heterogeneous beliefs le fichier attache est egalement edite dans les cahier de la chaire les particuliers face aux risques de l institut de finance de dauphine cahier n 7 mars 2007

inflation output growth and nominal and real uncertainty empirical evidence for the g7 abstract we use univariate garch models of inflation and output growth and monthly data for the g7 covering the 1957 2000 period to test for the causal effect of real and nominal macroeconomic uncertainty on inflation and output growth and the effect of inflation on inflation uncertainty our evidence supports a number of important conclusions first inflation is a positive determinant of uncertainty about inflation second output growth uncertainty is a positive determinant of the output growth rate third there is mixed evidence regarding the effect of inflation uncertainty on inflation and output growth hence uncertainty about the inflation rate is not necessarily detrimental to economic growth finally there is not much evidence supporting the hypothesis that output uncertainty raises inflation

dynamics of the cobweb model with adaptive expectations and nonlinear supply and demand the price quantity dynamics of the cobweb model with adaptive expectations and nonlinear supply and demand curves is analysed we prove that chaotic dynamical behaviour can occur even if both the supply and demand curves are monotonic the introduction of adaptive expectations into the cobweb model leads to price quantity fluctuations with a smaller amplitude however at the same time the price quantity cycles may become unstable and chaotic oscillations may arise we present a geometric explanation why chaos can occur for a large class of nonlinear monotonic supply and demand curves

the identification of monetary policy disturbances explaining the liquidity puzzle abstract this paper examines recent work on the identification of monetary policy disturbances its main finding is that the empirical anomalies found in the literature reflect a failure to properly address the federal reserve s policy of accommodating reserve demand shocks a new method of identifying monetary policy using nonborrowed reserves is proposed using this specification policy has a strong persistent liquidity effect regardless of subsample policy granger causes output even in the presence of interest rates explaining approximately 49 of the variance in output at a two year horizon and the residual explanatory power of interest rates for output is negligible

performance of monetary policy with internal central bank forecasting abstract recent models of monetary policy have analyzed the desirability of different optimal and ad hoc interest rules under the restrictive assumption that forecasts of the private sector and the central bank are homogeneous this paper studies the implications of heterogeneity in forecasting by the central bank and private agents for the performance of interest rules in a framework of econometric learning

volatility in productivity and the impact on unemployment volatility and the uncertainty it creates has long been recognized as a factor in economic decision making since hiring occurs before shocks to productivity are realized firms investment in ne

interpreting the macroeconomic time series facts the effects of monetary policy existing theory and evidence on the effects of monetary policy are reviewed substantial room for disagreement among economists remains new evidence based on multivariate time series studies of several countries is presented while certain patterns in the data consistent with effective monetary policy are strikingly similar across countries others particularly the tendency of interest rate increases to predict high inflation are harder to reconcile with effective monetary policy

oil price uncertainty and manufacturing production abstract given the rapid rise and volatility of oil prices the paper investigates the effect of oil price uncertainty on the south african manufacturing production using monthly observations covering the period 1974 02 to 2012 12 in addition we quantify the responses of manufacturing production to positive and negative oil price shocks we examine the dynamic relationship using a bivariate garch in mean var simultaneously estimated with a full information maximum likelihood technique the conditional standard deviation of the forecast of the growth of us crude oil imported acquisition cost by refiners is used as a measure of oil price uncertainty our results show that oil price uncertainty negatively and significantly impacts on south africa s manufacturing production we also find that the responses of manufacturing production to positive and negative shocks are asymmetric

measuring uncertainty based on rounding new method and application to inflation expectations abstract the literature on cognition and communication documents that people use round numbers to convey uncertainty this paper introduces a method of quantifying the uncertainty associated with round responses in pre existing survey data i construct micro level and time series measures of inflation uncertainty since 1978 inflation uncertainty is countercyclical and correlated with inflation disagreement volatility and the economic policy uncertainty index inflation uncertainty is lowest among high income consumers college graduates males and stock market investors more uncertain consumers are more reluctant to spend on durables cars and homes round responses are common on many surveys suggesting numerous applications of this method

the link between macroeconomic performance and variability in the uk abstract this paper examines the link between inflation output growth and their respective variabilities we employ a bivariate garch model which incorporates mean and level effects to investigate in a unified empirical framework all the possible interactions between the four variables we show that not only does variability affect performance but the latter influences the former as well specifically inflation has a positive impact on both variabilities

another perspective on the effects of inflation uncertainty this paper examines the effects of inflation uncertainty on real economic activity by utilizing a flexible dynamic multivariate framework that accommodates possible interaction between the conditional means and variances the empirical model is based on a familiar identified vector autoregressive framework modified to accommodate multivariate generalized autoregressive conditional heteroskedasticity our empirical model is preferred to the baseline var by likelihood based information criteria and it retains the important dynamics of the underlying var we find that an average shock to inflation uncertainty has tended to reduce output growth over three months by about 22 basis points

another perspective on gasoline price responses to crude oil price changes the effects of oil price volatility on the responses of gasoline prices to oil price shocks have received little attention in discussions on the relationship between the prices of crude oil and gasoline in this paper we consider such effects by using a bivariate structural vector autoregression which is modified to accommodate garch in mean errors our measure of oil price volatility is the conditional variance of the oil price change forecast error we isolate the effects of volatility in the price of oil on the price of gasoline and employ simulation methods to calculate nonlinear impulse response functions nirfs to trace any asymmetric effects of independent oil price shocks on the conditional means of gasoline prices we test whether the relationship between the prices of crude oil and gasoline is symmetric using tests of the null hypothesis of symmetric impulse responses based on monthly u s data over the period from 1978 1 to 2014 11 our empirical results show that gasoline prices respond asymmetrically to positive and negative oil price shocks we also find that oil price volatility has a positive effect on the price of gasoline and it contributes to the asymmetries in the transmission of oil price shocks

the link between output growth and volatility evidence from a garch model with panel data abstract estimation results from a dynamic panel garch model for g7 countries over the 1965 2007 period support that higher output growth is associated with higher volatility of the innovations to growth but higher growth does not lead to more economic uncertainty

a quantile framework for analysing the links between inflation uncertainty and inflation dynamics across countries in contrast to the conventional conditional mean approaches this study uses quantile regression techniques to present some new statistical evidence on the links between inflation uncertainty and the level of inflation with cross sectional data from 90 countries during the period 1961 to 2006 the results suggest that positive inflation shocks have stronger impact on inflation uncertainty which varies across the quantiles furthermore popular time series models are evaluated for their ability to reproduce measures of uncertainty and indicate similar results regarding the relationships between inflation and inflation uncertainty

stability chaos and multiple attractors a single agent makes a difference abstract this paper provides an example in which a slight behavioral heterogeneity may fundamentally change the dynamical properties of a nonlinear cobweb market with a quadratic cost function and an isoelastic demand function we consider two types of producers cautious adapters and naive optimizers in a market of naive optimizers a single cautious adapter stabilizes the otherwise exploding market in a market of cautious adapters a single naive optimizer may destabilize the market without him there exists at most one periodic attractor in the market but with him there may appear many and even infinitely many coexisting periodic attractors

the fair trade movement parameters issues and future research although fair trade has been in existence for more than 40 years discussion in the business and business ethics literature of this unique trading and campaigning movement between southern producers and northern buyers and consumers has been limited this paper seeks to redress this deficit by providing a description of the characteristics of fair trade including definitional issues market size and segmentation and the key organizations it discusses fair trade from southern producer and northern trader and consumer perspectives and highlights the key issues that currently face the fair trade movement it then identifies an initial research agenda to be followed up in subsequent papers

macroeconomic uncertainty and performance in the european union abstract we use a very general bivariate garch m model and monthly data on eu countries covering the 1962 2003 period to test for the impact of real output growth and nominal inflation macroeconomic uncertainty on inflation and output growth our evidence supports a number of important conclusions first in the majority of countries uncertainty regarding the output growth rate is related to the average growth rate and the effect in several countries is negative second in half of the cases there is no significant relationship between inflation uncertainty and output growth performance third inflation and output uncertainty have a mixed effect on inflation nevertheless considerable evidence for the cukierman meltzer hypothesis is obtained our conclusions are based on adopting both a structural and a reduced form bivariate garch model finally we also find statistically significant evidence of regime switching for both inflation and output growth volatility throughout the sample

measuring the response of macroeconomic uncertainty to shocks recent research documents the importance of uncertainty in determining macroeconomic outcomes but little is known about the transmission of uncertainty across such outcomes this paper examines the response of uncertainty about inflation and output growth to shocks documenting statistically significant size and sign bias and spillover effects uncertainty about inflation is a determinant of output uncertainty whereas higher growth volatility tends to raise inflation volatility both inflation and growth volatility respond asymmetrically to positive and negative shocks negative growth and inflation shocks lead to higher and more persistent uncertainty than shocks of equal magnitude but opposite sign

uncertainty and the employment dynamics of small and large businesses we examine the impact of uncertainty on employment dynamics alternative measures of uncertainty are constructed based on the survey of professional forecasters and regression based forecasting models for gdp growth inflation sp the impact on large businesses are generally non existent or weaker our results suggest that to truly understand the effects of uncertainty on employment dynamics we need to focus on the relatively smaller and entrepreneurial businesses we discuss implications for the framing of economic policy

on the investment uncertainty relationship in a real options model abstract it appears to be widely accepted in the real options literature that an increase in uncertainty should have an inhibiting effect on investment our article demonstrates that the notion of a negative uncertainty investment relationship is not always correct we show that in certain situations an increase in uncertainty can actually increase the probability of investing and thereby have a positive impact on investment

inflation and unemployment the world economy today is vastly different from the 1930s when seymour harris the chairman of this meeting infected me with his boundless enthusiasm for economics and his steadfast confidence in its capacity for good works economics is very different too both the science and its subject have changed and for the better since world war ii but there are some notable constants unemployment and inflation still preoccupy and perplex economists statesmen journalists housewives and everyone else the connection between them is the principal domestic economic burden of presidents and prime ministers and the major area of controversy and ignorance in macroeconomics i have chosen to review economic thought on this topic on this occasion partly because of its inevitable timeliness partly because of a personal interest reaching back to my first published work in 1941

oil price uncertainty and the u s stock market analysis based on a garch in mean var model abstract this paper uses a bivariate garch in mean var model to examine the effect of oil price uncertainty on the u s real stock returns at the aggregate and sectoral levels estimation results suggest that there is no statistically significant effect of oil price volatility on the u s stock returns the absence of an uncertainty effect might be explained by the fact that companies are likely to hedge against fluctuations in oil prices it could also stem from the ability of most companies to transfer the higher cost of oil to customers moreover the impulse responses indicate that accounting for oil price uncertainty oil price increases and decreases have symmetric effects on the u s aggregate stock returns in that energy price increases and decreases are estimated to have equal and opposite effects on the u s financial market however this symmetric effect doesn t hold across all the sectors studied in this paper

inflation output and uncertainty in the era of inflation targeting a multi economy view on causal linkages abstract this study provides cross country robust evidence on interdependencies among inflation output growth and respective uncertainties for the current era of low inflation policies we attribute the extant empirical disagreement on these relations to the fact that long sampling periods and single economies are typically considered for analysis in this study varx mgarch m models are estimated for 34 developed and emerging economies and the time period of 1990 2010 we study average granger causal effects by aggregating parameter estimates over economies the cross sectional variation of estimates serves as a means to assess the robustness of empirical findings over the entire cross section we find that both inflation and inflation uncertainty significantly reduce output growth economies with low inflation rates are particularly at risk to incur output losses from increasing inflation we also find spillover effects among uncertainty variables where the causal impact if present seems to point from the uncertainty in output to inflation uncertainty

relationship between inflation rate and inflation uncertainty abstract to shed further light on the possible link between inflation rate and inflation uncertainty the paper explores the relationship for us monthly inflation over 1926 to 1992 with various arfima garch type models it found that the inflation affected its uncertainty weakly negatively whereas the uncertainty affected the inflation insignificantly the results were robust to the high inflation period of the 1970s and the volatile period of 1929 to 1945 it supports engle s result that a high rate of inflation does not necessarily imply a high variance of inflation unlike friedman s view that a high rate of inflation leads to a high variance of inflation

the missing link between corporate social responsibility and consumer trust the case of fair trade products this paper investigates the link between the consumer perception that a company is socially oriented and the consumer intention to buy products marketed by that company we suggest that this link exists when at least two conditions prevail 1 the products sold by that company comply with ethical and social requirements 2 the company has an acknowledged commitment to protect consumer rights and interests to test these hypotheses we conducted a survey among the clients of retail chains offering fair trade products the results show that socially oriented companies can successfully leverage their reputation to market products with high symbolic values

disagreement as a measure of uncertainty this paper presents evidence from the livingston survey of inflation forecasts that forecaster disagreement provides a useful measure of forecast uncertainty the evidence is analogous to the evidence for arch effects disagreement at the time of the forecast has as large positive effect on the conditional variance of the subsequent forecast error as a conditioning variable forecaster disagreement dominates arch for both survey errors and the error terms in robert engle s quarterly model of inflation as measured by the resulting conditional variances disagreement indicates larger and more variable levels of uncertainty for the 1946 94 period copyright 1996 by ohio state university press

adaptive expectations and cobweb phenomena does heterogeneity matter this paper studies a cobweb type commodity market characterized by a strictly monotone demand and supply in which n types of firms operate types differ in a key parameter governing price expectations which are supposed to be adaptive the unique steady state of the resulting economic dynamics is characterized in terms of stability and the impact of the number of firms types is studied to this end the notions of structural and behavioural degree of instability which are introduced in the paper prove to be crucial in determining whether stability or instability prevail the case of market integration is also considered and conditions to have stability or instability in terms of the original markets parameters are given the baseline structure is extended in two directions the first extension assumes the point of view of an authority who is uncertain about the firms types in this case the structural degree of instability determines how heterogeneity affects the probability of ending up with a stable outcome the second extension consists in endogenizing the choice of predictors through a discrete choice based evolutionary mechanism in both cases the amount of the heterogeneity and its possible variations play a critical role in shaping the range of possible long run outcomes of the model

oil price uncertainty in canada bernanke bernanke ben s irreversibility uncertainty and cyclical investment quarterly journal of economics 98 1983 85 106 shows how uncertainty about energy prices may induce optimizing firms to postpone investment decisions thereby leading to a decline in aggregate output elder and serletis elder john and serletis apostolos oil price uncertainty http ssrn com abstract 908675 2009 find empirical evidence that uncertainty about oil prices has tended to depress investment in the united states in this paper we assess the robustness of these results by investigating the effects of oil price uncertainty in canada our results are remarkably similar to existing results for the united states providing additional evidence that uncertainty about oil prices may provide another explanation for why the sharp oil price declines of 1985 failed to produce rapid output growth impulse response analysis suggests that uncertainty about oil prices may tend to reinforce the negative response of output to positive oil shocks

the cobweb borrowing and financial crises abstract studies of non linear cobweb models have failed to address a fundamental issue whether the complex dynamical behavior displayed by such models is consistent with the survival of producers this paper shows that where borrowing is unconstrained as is implicitly assumed in standard cobweb models borrowing results in financial crises incorporating constraints on borrowing is needed to salvage cobweb models industry performance in terms both of profitability and of the incidence of bankruptcies is highly sensitive to the nature of such credit restrictions

heterogeneous beliefs and the non linear cobweb model abstract this paper generalizes the evolutionary cobweb model with heterogeneous beliefs of brock and hommes 1997 econometrica 65 1059 1095 to the case of non linear demand and supply agents choose between a simple freely available prediction strategy such as naive expectations and a sophisticated costly prediction strategy such as rational expectations and update their beliefs according to an evolutionary fitness measure such as past realized net profits it is shown that for generic non linear monotonic demand and supply curves the evolutionary dynamics exhibits rational routes to randomness that is bifurcation routes to strange attractors occur when the traders sensitivity to differences in evolutionary fitness increases

cooperation and competition in the context of organic and mechanic worldviews a theoretical and case based discussion in this study we argue that there is an interconnection between the mechanistic worldview and competition and the organic worldview and cooperation to illustrate our main thesis we introduce two cases first max havelaar a paradigmatic case of how business might function in an economy based upon solidarity and sustainability second tine a norwegian grocery corporation engaged in collusion in order to force a small competitor out of the market on the one hand in order to encourage market behaviour that integrates economic societal and environmental values we find that transparent cooperation within a context of an organic worldview takes care of important intrinsic as well as instrumental values on the other hand we find evidence for asserting that cooperation based upon a mechanistic worldview typically leads to group egotistical consequences undermining the long term common good

exchange rate shocks and trade a multivariate garch m approach abstract we build on the recent literature studying the effects of uncertainty on trade by introducing a model that combines a reduced form vector autoregression for the growth rates of exports foreign income and the real exchange rate rer with a multivariate garch model up to 12 lags of several conditional standard deviations are added to relevant mean equations and all parameters are estimated simultaneously using maximum likelihood thus allowing us to avoid two step procedures that are common in the literature using a large data set of both developed and emerging countries we find evidence that rer uncertainty negatively impacts trade for several less developed countries we also find that rer uncertainty tends to be associated with a real currency appreciation when we compute generalized impulse response functions to study the impacts of unexpected shocks to rer growth on export growth the results are typically asymmetric positive shocks generate substantial negative responses while unexpected depreciations produce relatively smaller positive responses especially in our developing country sample

heterogeneous expectations exchange rate dynamics and predictability abstract this paper proposes a simple chartist fundamentalist model in which we allow for nonlinear time variation in chartists extrapolation rate estimation of the model using monthly data for the major currencies vis a vis the us dollar shows that the model is significant in sample and that it has out of sample predictive power for some of the currencies we investigate the power of tests of the random walk model to detect predictability against the alternative of the proposed model we find that the evidence of short term unpredictability and the long term predictability are consistent with our model

oil price uncertainty and unemployment abstract in this study we empirically search the effects of oil price uncertainty and oil price shocks on u s unemployment rate using a garch in mean var model for the period 1974 q2 2017 q4 based on our findings we show that oil price uncertainty significantly increases unemployment rate in the u s economy likewise our impulse response analysis affirms that a positive oil price shock increases unemployment while the response of unemployment to a negative oil price shock is negative moreover we reveal that unemployment rate reacts to positive and negative shocks asymmetrically more specifically the response of unemployment to negative oil price shocks is negative and slighter in size besides oil price uncertainty is found to magnify the rise in the u s unemployment rate these findings are in keeping with the real options theory which reveals that the uncertainty about goods prices leads firms to postpone or abandon their production and investment and they seem to be robust to the use of different real oil price measures

macroeconomic expectations of households and professional forecasters economists have long emphasized the importance of expectations in determining macroeconomic outcomes yet there has been almost no recent effort to model actual empirical expectations data instead m acroeconomists usually simply assume that expectations are rational this paper shows that while empirical household expectations are not rational in the usual sense expectational dynamics are well captured by a model in which households views derive from news reports of the views of professional forecasters which in turn may be rational the model s estimates imply that people only occasionally pay attention to news reports this inattention generates stickyness in aggregate expectations with important macroeconomic consequences

an analysis of the cobweb model with boundedly rational heterogeneous producers abstract this paper considers the traditional cobweb model with heterogenous risk averse producers whose supply functions involve their estimates of the conditional mean and variance of the future price the producers seek to learn these quantities by applying geometric decay processes gdp to past prices the heterogeneity manifests itself in the lag lengths and memory parameters applied to past prices as well as in risk aversion coefficients we find that each dimension of heterogeneity changes enriches the cobweb dynamics with respect to the case of homogeneous producers

a new approach to identifying the real effects of uncertainty shocks this article introduces the use of the sign restrictions methodology to identify uncertainty shocks we apply our methodology to a class of vector autoregression models with stochastic volatility t

adaptive expectations coordination in an economy with heterogeneous agents abstract in this paper we study the problem of expectations coordination on the stationary state in a one dimensional economy with heterogeneous agents we consider a constant gain adaptive learning rule we allow for heterogeneity of the fundamentals and of the constant gain parameters we show that these two sources of heterogeneity may create difficulties to the process of coordination

causality between inflation and real growth abstract the paper investigates inflation growth causality over 1947 2005 with varma ml asymmetric vgarch the results imply that one uncertainty affects positively its level and much less negatively the other level whereas one level influences positively both uncertainties friedman s hypothesis was not strongly rejected

on information and market dynamics the case of the u s beef market abstract the paper investigates the nature of dynamic prices and expectations in a competitive market the approach is applied to the u s beef market which exhibits cyclical patterns and significant biological lags in the production process beef price equations are estimated under different expectation regimes the empirical results indicate the presence of heterogeneous price expectations with a significant number of market participants neglecting information about the existence of a beef cycle

the effects of real and nominal uncertainty on inflation and output growth some garch m evidence in this paper we use garch m methods to test four hypotheses about the effects of real and nominal uncertainty on average inflation and output growth in the united states from 1948 to 1996 we find no evidence that higher inflation uncertainty or higher output growth uncertainty raises the average inflation rate we also find no support for the idea that more risky output growth is associated with a higher average real growth rate our key result is that in a variety of models and sample periods inflation uncertainty significantly lowers real output growth copyright 2000 john wiley sons ltd

the asymmetric effects of oil price and monetary policy shocks a nonlinear var approach in this paper we investigate the asymmetric effects of oil price shocks and monetary policy on macroeconomic activity using monthly data for the united states over the period from 1983 1 to 2008 12 in doing so we use a logistic smooth transition vector autoregression var as detailed in terasvirta and anderson 1992 and weise 1999 and make a distinction between two oil price volatility regimes high and low using the realized oil price volatility as a switching variable we isolate the effects of oil price and monetary policy shocks and their asymmetry on output growth and following koop et al 1996 and weise 1999 we employ simulation methods to calculate generalized impulse response functions girfs to trace the effects of independent shocks on the conditional means of the variables our results suggest that in addition to the price of oil oil price volatility has an impact on macroeconomic activity and that monetary policy is not only reinforcing the effects of oil price shocks on output it is also contributing to the asymmetric response of output to oil price shocks

do measures of monetary policy in a var make sense no in many vector autoregressions vars monetary policy shocks are identified with the least squares residuals from a regression of the federal funds rate on an assortment of variables such regressions appear to be structurally fragile and are at odds with other evidence on the nature of the u s federal reserve s reaction function furthermore the residuals from these regressions show little correlation across various vars or with funds rate shocks that are derived from forward looking financial markets my results provide a sharp critique of current monetary vars

on inflation and inflation uncertainty in the g7 countries abstract the relationship between inflation and inflation uncertainty is investigated in the g7 countries from 1948 to 1993 garch models are used to generate a measure of inflation uncertainty and then granger methods are employed to test the causality between average inflation and inflation uncertainty in all g7 countries inflation significantly raises inflation uncertainty as predicted by friedman and ball weaker evidence is found that inflation uncertainty granger causes inflation in three countries us uk and germany increased inflation uncertainty lowers inflation while in two countries japan and france increased inflation uncertainty raises inflation

monetary policy uncertainty and economic fluctuations uncertainty associated with the monetary policy transmission mechanism is a key driving force of business cycles to investigate this link we propose a new term structure model that allows the volatility of the yield curve to interact with macroeconomic indicators the data favors a model with two volatility factors that capture shortterm and long term monetary policy uncertainty increases in either of them lead higher unemployment rates but they interact with ination in opposite directions

local convergence properties of a cobweb model with rationally heterogeneous expectations abstract this paper gives local stability conditions for convergence of the price dynamics in a cobweb model with rationally heterogeneous expectations generalizing the example of brock and hommes 1997 when agents choose between rational naive and adaptive beliefs the steady state may be locally asymptotically stable if the adaptive predictor places enough weight on past prices and is costless if adaptive expectations are sufficiently more costly than naive expectations the steady state will be an unstable saddle point our results imply that adding a choice can stabilize a system which is unstable under the brock and hommes model these results illustrate how the critical parameter that governs stability is dependent on the array of available predictors

inflation and output growth uncertainty and their relationship with inflation and output growth abstract using a bivariate garch model of inflation and output growth we find evidence that higher inflation and more inflation uncertainty lead to lower output growth in the japanese economy these results support the argument of a price stability objective for the monetary authority