This paper analyzes an empirical puzzle regarding the effect of monetary policy on fixed investment, specifically, why residential investment exhibits a strong and rapid response to changes in monetary policy while structures investment manifests a substantially weaker response. The paper...

This paper examines welfare-maximizing monetary policy in an estimated micro-founded general equilibrium model of the U.S. economy where the policymaker faces uncertainty about model parameters. Uncertainty about parameters describing preferences and technology implies not only uncertainty about...

We add a nominal tax system to a sticky-price monetary business cycle model. When nominal interest income is taxed, the coefficient on inflation in a Taylor-type monetary policy rule must be significantly larger than one in order for the model economy to have a determinate rational expectations...