In this paper, we present a dynamic optimizing model that allows explicitly for imperfect substitutability between di erent financial assets. This is specified in a manner which captures Tobin's (1969) view that an expansion of one asset's supply a ects both the yield on that asset and the...

A major criticism of standard specifications of price adjustment in models for monetary policy analysis is that they violate the natural rate hypothesis by allowing output to differ from potential in steady state. In this paper we estimate a dynamic optimizing business cycle model whose...

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. The last two variants imply forward-looking behavior of...