In this paper, I combine disappointment aversion, as employed by Routledge and Zin and Campanale, Castro and Clementi, with rare disasters in the spirit of Rietz, Barro, Gourio, Gabaix and others. I find that, when the model’s representative agent is endowed with an empirically plausible...

Tax rates on labor income, capital income and consumption-and the redistributive transfers those taxes finance-differ widely across developed countries. Can majority-voting methods, applied to a calibrated growth model, explain that variation? The answer I fund is yes, and then some. In this...

We prove that the Generalized Taylor Principle, under which the nominal interest rate reacts more than one-for-one to inflation in the long run, is a necessary and (under some extra mild restrictions on parameters) sufficient condition for determinacy in a sticky price model with positive...

We investigate the roles of a time-varying inflation target and monetary and fiscal policy stances on the dynamics of inflation in a DSGE model. Under an active monetary and passive fiscal policy regime, inflation closely follows the path of the inflation target and a stronger reaction of...