#2008-035A "Macroeconometric Equivalence, Microeconomic Dissonance, and the Design of Monetary Policy"
by Andrew T. Levin, J. David López-Salido, Edward Nelson, and Tack Yun
October 2008

Many recent studies in macroeconomics have focused on the estimation of DSGE models using a system of loglinear approximations to the models’ nonlinear equilibrium conditions. More...

PUBLISHED: Journal of Monetary Economics, October 2008, 55(S1), pp. S48-62

#2008-013C "Why Money Growth Determines Inflation in the Long Run: Answering the Woodford Critique"
by Edward Nelson
May 2008
Revised August 2008

Woodford (2007) argues that it is not appropriate to regard inflation in the steady state of New Keynesian models as determined by steady-state money growth. Woodford instead argues that the intercept term in the monetary authority’s interest-rate policy rule determines steady-state inflation. In this paper, I offer an alternative interpretation of steady-state behavior, according to which it is appropriate to regard steady-state inflation as determined by steady-state money growth. More...

FORTHCOMING: Journal of Money, Credit, and Banking, May 2008

#2007-048D "The Impact of Milton Friedman on Modern Monetary Economics: Setting the Record Straight on Paul Krugman’s 'Who Was Milton Friedman?'"
by Edward Nelson, and Anna J. Schwartz
October 2007
Revised January 2008

Paul Krugman’s essay “Who Was Milton Friedman?” seriously mischaracterizes Friedman’s economics and his legacy. In this paper we provide a rejoinder to Krugman on these issues. More...

PUBLISHED: Journal of Monetary Economics, May 2008, 55(4), pp. 835-56

#2007-026D "An Overhaul of Doctrine: The Underpinning of U.K. Inflation Targeting"
by Edward Nelson
July 2007
Revised August 2008

This paper argues that the inflation targeting regime prevailing in the United Kingdom is not the result of a change in policymaker objectives. More...

#2007-006B "An Estimated DSGE Model for the United Kingdom"
by Riccardo DiCecio, and Edward Nelson
February 2007
Revised May 2007

We estimate the dynamic stochastic general equilibrium model of Christiano, Eichenbaum, and Evans (2005) on United Kingdom data. More...

PUBLISHED: Federal Reserve Bank of St. Louis Review, July/August 2007, 89(4), pp. 215-31

#2007-005C "Money and the Natural Rate of Interest: Structural Estimates for the United States and the Euro Area"
by Javier Andrés, J. David López-Salido, and Edward Nelson
February 2007
Revised April 2008

We examine the role of money in three environments: the New Keynesian model with separable utility and static money demand; a nonseparable utility variant with habit formation; and a version with adjustment costs for holding real balances. More...

FORTHCOMING: Journal of Economic Dynamics and Control

#2007-002B "Milton Friedman and U.S. Monetary History: 1961−2006"
by Edward Nelson
January 2007
Revised March 2007

This paper brings together, using extensive archival material from several countries, scattered information about Milton Friedman’s views and predictions regarding U.S. monetary policy developments after 1960 More...

PUBLISHED: Federal Reserve Bank of St. Louis Review, May/June 2007, 89(3), pp. 153-82

#2006-052E "The Great Inflation and Early Disinflation in Japan and Germany"
by Edward Nelson
September 2006
Revised September 2007

This paper considers the Great Inflation of the 1970s in Japan and Germany. From 1975 onward, these countries had low inflation relative to other large economies. More...

PUBLISHED: International Journal of Central Banking, December 2007, 3(4), pp. 23-76

#2006-030A "U.K. Inflation Targeting and the Exchange Rate"
by Christopher Allsopp, Amit Kara, and Edward Nelson
May 2006

The United Kingdom’s monetary policy strategy is one of floating exchange rates and inflation forecast targeting, with the targeted measure referring to consumer prices. We consider whether it is welfare-reducing to target inflation in the CPI rather than in a narrower index; and the role of the exchange rate in the transmission of monetary policy actions to CPI inflation. More...

PUBLISHED: Economic Journal, June 2006, 116(512), pp. F232-44

#2006-016A "Ireland and Switzerland: The Jagged Edges of the Great Inflation"
by Edward Nelson
March 2006

Ireland and Switzerland both had rising inflation during the early 1970s, but their experiences diverged thereafter, so that they form a rare example of two countries whose inflation rates are poorly correlated with one another over the Great Inflation period. In addition, each of the two countries' records is anomalous in important respects relative to other economies' 1970s inflations. This paper proposes that the monetary policy neglect hypothesis can account for the anomalies, providing a consistent explanation for the Great Inflation across countries. Extensive archival evidence is considered from each country regarding the doctrines that guided 1970s policymaking. More...

PUBLISHED: European Economic Review, May 2008, 52(4), pp. 700-32