We consider the nature of optimal cyclical monetary policy in three different stochastic models with various shocks. The first is a pure liquidity effect model, the second is a cost of changing prices model, and the third is an optimal seignorage model. In each case we solve for the optimal...

We assess the quantitative importance of the expectation effects of regime shifts in monetary policy in a DSGE model that allows the monetary policy rule to switch between a ?bad? regime and a ?good? regime. When agents take into account such regime shifts in forming expectations, the...