Inflation targeting: some extensions

Article Abstract:

Inflation targeting was examined in the context of the monetary policy response to different shocks, consequences of model uncertainty and effects of interest rate smoothing and stabilization. Results suggested that inflation targeting implies that the conditional inflation forecast becomes an intermediate target and revealed how a positive weight on output-gap stabilization affects such intermediate target. Thus, the best way to react to shocks is to determine how they affect the inflation forecast before taking an appropriate measure.

Inflation Accounting, Economic aspects, Inflation (Finance), Inflation (Economics)

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Expected and predicted realignments: the FF/DM exchange rate during the EMS, 1979-93

Article Abstract:

The drift adjustment method was employed to estimate the expected realignments of the French franc/Deutsche mark exchange rate during the existence of the European Rate Mechanism. The results, which reveal a strong mean reversion for the exchange rates within the band, show the expected rate of depreciation within the band, represented by the adjustment term, having the same magnitude as the interest rate differentials. As such, they confirm the predictions made by the Bertola-Svensson model.

Foreign exchange, Foreign exchange rates, European Monetary System, Franc (France), Mark (Germany)

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Estimating the term structure of interest rates for monetary policy analysis

Article Abstract:

Yields of Swedish Treasury bills and government bonds are evaluated to determine and compare spot and implied forward interest rate estimates of the two instruments using the Longstaff & Schwartz (LS) and Nelson & Siegel (NS) functional forms. Results show that NS is more appropriate for monetary policy analysis. It provides better convergence characteristics ease of use. On the other hand, LS exhibits more flexible properties.

Analysis, Government securities, Treasury securities

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