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The conventional and new inflation bias theories present two distinct facets to explain the outcome of excess inflation without output gains by a discretionary central banker. First is the temptation to achieve a higher than potential output, and, second is not to let it falter. The authors explicitly account for these two distinct dimensions in empirical formulations both exogenously and endogenously. Specifically, the purpose of this paper is to investigate what monetary discretion can and cannot do in terms of dual objectives – inflation and growth – across boom and bust cycles, both directly and indirectly.

(i) Segregate the economic activity into boom and bust cycles; (ii) Explicitly account for the two dimensions of conventional and new inflation bias theories; and (iii) model and estimate the direct and indirect effects of monetary discretion across business cycles.

The results indicate considerable asymmetries in the effects of monetary discretion and distribution thereof across objectives and cycles. The direct impact of monetary discretion tends to induce significantly higher inflation in boom and bust cycles, while it exerts a positive but insignificant effect on output. The inflation effects are more pronounced in boom than bust cycles and vice versa are the output effects. The indirect effects on output via inflation are significantly pernicious, which are more pronounced in expansions than recessions.

In a nutshell, instead of benefiting, monetary discretion tends to harm in terms of both the dual policy objectives, which cautions about its well calculated and constrained use only.

This study investigates whether cyclical turning points in the U.S. and U.K. stock markets are unevenly distributed over the year, that is, whether they are more likely to occur during certain months of the year. In examining this form of periodic seasonality, a Markov switching‐model is applied to U.S. and U.K. stock market chronologies of monthly peak and trough dates for the periods May 1835 through March 2000 and May 1836 through September 2000, respectively. In order to provide some evidence on robustness with respect to the sample data, results are obtained for the entire sample periods as well as for various sub‐. For both markets, the evidence indicates that while the probability of moving from an expansion to a contraction does not depend on the month of the year, the probability of switching from a contraction is greater for some months. Additionally, the durations of contractions, but not expansions, are dependent on the month of the year in which they begin.

This study seeks to determine in some detail whether the state of the economic cycle matters in considering the effects of fiscal policy shocks on output.

This issue leads us to two primary objectives: to define the economic cycle measuring the gap with the unobserved component model with a smoother trend, which can be used efficiently to generate gap measures for use in real-time decision-making and avoids the criticisms of measures based on contentious structural models; and to look empirically at the fiscal policy stance over the phases of the cycle, bearing in mind the short time variation and smooth change between the cycle regimes.

This paper provides evidence that the fiscal policy rule seems to operate with varied coefficients depending on whether the transition variable is below or above the estimated threshold value.

The asymmetric response gives policymakers the impetus to reconsider the fiscal policy framework because of specific circumstances, such as shocks that can dramatically affect the nominal features of the business cycle. Put differently, stable and moderate fiscal policies would at least not contribute to cyclical fluctuations, and therefore would be better than what we have typically experienced. There would, therefore, seem to be a distinct need to address the properties of economic cycles under different fiscal policy rules.

This paper aims to investigate the nonlinear dynamics in the effects of oil price shocks on the exchange rate for a sample from the Group of Twenty (G20) over the period 1994:1-2019:1.

Using monthly time series data covering the period1994:1-2019:1, the author first use the non-parametric triples test of Randles et al. (1980) to ascertain the existence of asymmetric properties in the sample of exchange rates. Then the author used the nonlinear ARDL cointegration approach developed by Shin et al. (2014) to examine the reaction of these exchange rates to the oil price shocks.

This study has identified significant evidence that the exchange rate is asymmetrically distributed, with the effect that high appreciation of the exchange rate is followed by slower depreciation. The NARDL results support such asymmetry even more strongly because in the test the exchange rate is shown to react differently in the long term to positive and negative shocks in oil prices. Another major finding was that the speed of adjustment differed over the sample, as the cumulative dynamic multipliers effect highlighted.

This change in direction and the employment of non-linear technique can be to obtain better insight into the model specification, which the author believes, will not only enhance the findings in the literature but also enhance forecasting and decision-making.

A practical implication of this change is the possibility that policymakers and participants concerned with exchange rate stability should intervene in the market to alleviate the unfavourable impact of oil price shocks on the exchange rate.

Addressing this nonlinear dynamic in the effects of oil price shocks on the exchange rate have at least the following two important reasons: asymmetry and regime change are types of nonlinearities that affect the market dynamics, especially, over marked sample period with such financial crises as the global financial crises of 2007, thereby violating the linear models. Adopting an asymmetric cointegration technique permits to incorporate cointegrated positive and negative components of the considered series.