Monetary policy has significant but overlooked effects on entry and exit of firms. We study optimal monetary stabilization policy in a DSGE model with microfounded money demand and endogenous firm entry. Due to a congestion externality affecting firm entry, the optimal policy deviates from the...

We construct a dynamic stochastic general equilibrium model to study optimal monetary stabilization policy. Prices are fully flexible and money is essential for trade. Our main result is that if the central bank pursues a price-level target, it can control inflation expectations and improve...

Gavin and Kydland (1999) calculated the cyclical properties of money and prices for the periods before and after the October 1979 policy change. In this article, we extend that work by adding four more years of data and including a study of nominal interest rates and inflation. The adoption of a...

This paper develops a monetary model with taxes to account for the apparently asymmetric and time-varying effects of energy shocks on output and hours worked in post-World War II U.S. data. In our model, the real effects of an energy shock are amplified when the monetary authority responds to...

We study the use of intermediated assets as media of exchange in a neo- classical growth model. An intermediary is delegated control over productive capital and finances itself by issuing claims against the revenue generated by its operations. Unlike physical capital, intermediated claims are...

Mortgage loans are a striking example of a persistent nominal rigidity. As a result, under incomplete markets, monetary policy affects decisions through the cost of new mortgage borrowing and the value of payments on outstanding debt. Observed debt levels and payment to income ratios suggest the...