In linear macroeconomic models, an active Taylor rule for monetary policy can guarantee a locally unique nonexplosive equilibrium. In a series of articles, Benhabib, Schmitt-Grohé, and Uribe looked beyond the local dynamics and showed that active Taylor rules could interact with the zero bound...

In linear macroeconomic models, an active Taylor rule for monetary policy can guarantee a locally unique nonexplosive equilibrium. In a series of articles, Benhabib, Schmitt-Grohé, and Uribe looked beyond the local dynamics and showed that active Taylor rules could interact with the zero bound...

Short-term interest rates in the United States have been near their lower bound since late 2008. Treasury rates out to a two-year maturity have been close to zero since mid-2011, and over this same period, inflation has been declining. This combination of low interest rates and declining...

In a plain-vanilla New Keynesian model with two-period staggered price-setting, discretionary monetary policy leads to multiple equilibria. Complementarity between the pricing decisions of forward-looking firms underlies the multiplicity, which is intrinsically dynamic in nature. At each point...

Recent evidence on the effect of government spending shocks on consumption cannot be easily reconciled with existing optimizing business cycle models. We extend the standard New Keynesian model to allow for the presence of rule-of-thumb (non-Ricardian) consumers. We show how the interaction of...

We develop a general equilibrium model of a two-region currency union. There are two types of goods: non-traded goods, and traded goods for which markets are segmented. Monetary policy is set by a central monetary authority and is non-neutral due to nominal price rigidities. Fiscal policy is...

In a plain-vanilla New Keynesian model with two-period staggered price-setting, discretionary monetary policy leads to multiple equilibria. Complementarity between pricing decisions of forward-looking firms underlies the multiplicity, which is intrinsically dynamic in nature. At each point in...

We study discretionary equilibrium in the Calvo pricing model for a monetary authority that chooses the money supply, producing three main contributions. First, price-adjusting firms have a unique equilibrium price for a broad range of parameterizations, in contrast to earlier results for the...