Essays On Trend Inflation

"This thesis addresses questions concerning international currency, trend inflation, and policy uncertainty. The first essay studies the impact of trend inflation on the share of the leading international currency in global payments. By constructing a three-country model with trend inflation in which the share of the leading international currency is endogenous, we find that the position of the leading international currency persists even if the inflation rate in its own country increases from $0$ to $8$ percent. Moreover, incorporation of trend inflation in the open-economy model reveals that domestic trend inflation amplifies the spillover effects of a domestic technology shock on foreign countries. Trend inflation in foreign countries reinforces these spillover effects through the effect of price dispersion. To explore the costs and benefits of having an international currency, the second essay constructs a two-country model in which the home country provides the international currency and the foreign country uses it to purchase imports. Implications of this model are derived under two pricing assumptions. One, where the prices of all traded goods are set in the domestic currency and the other, where the prices of all traded goods are set in the international currency. We identify new sources of benefits and costs of having an international currency. The third essay investigates how monetary policy uncertainty affects macroeconomy under financial frictions. We apply a New-Keynesian model with a financial accelerator mechanism and introduce the monetary policy uncertainty as a mean preserving shock to the variance of the level interest rate shock. Results show a negative impact of policy uncertainty on macroeconomy. Financial accelerator mechanism amplifies this adverse effects. Furthermore, among the productivity uncertainty and risk shock, policy uncertainty induces the strongest output responses. " --