This paper develops and estimates an equilibrium model of the term structures of nominal and real interest rates. The term structures are driven by state variables that include the short term real interest rate, expected inflation, a factor that models the changing level to which inflation is...

This paper develops a model of the term structures of nominal and real interest rates driven by state variables representing the short-term real interest rate, expected inflation, inflation’s central tendency, and four volatility factors that follow GARCH processes. We derive analytical...

The present paper studies optimal monetary policy when the representative agent assumption is abandoned and financial wealth heterogeneity across households is introduced. Incomplete markets make households incapable of perfectly insuring against interest rate and inflation risk, creating a...

A presentation of an equilibrium bond-pricing model driven by two stochastic factors: the real interest rate and the expected rate of inflation. The models parameters are estimated using a maximum-likelihood technique based on a Kalman filter.

We estimate a discrete-time multivariate pricing kernel for the term structure of interest rates, using both yields and inflation rates. This gives a separate estimate of the real kernel and the nominal kernel, taking into account a relatively sophisticated dynamical structure and mutual...

A study of the effect of disinflation policies on monetary velocity, which shows a systematic relation between unexpected changes in the money-income relationship and changes in the trends of inflation rates, and which concludes that the failure to commit to a stable price policy tends to...

There is growing evidence that the empirical Phillips curve within the US has changed significantly since the early 1980’s. In particular, inflation persistence has declined sharply. The paper demonstrates that this decline is consistent with a standard Dynamic New Keynesian (DNK) model in...

An analysis of the use of limited-information estimators as measures of core inflation, showing that these estimators, such as the median of the cross-sectional distribution of inflation, have a higher correlation with past money growth and deliver improved forecasts of future inflation relative...

This paper considers the evidence of “near-rationality,” as described by Akerlof, Dickens, and Perry (2000). Using detailed surveys of household inflation expectations for the United States and Sweden, we find that the data are generally unsupportive of the near-rationality hypothesis....

A comparison showing that the transition costs of indexing inflation (a major obstacle to monetary policy reform) are approximately equal to the minor shoe-leather benefits of having price stability.