An economy is in a liquidity trap when monetary policy cannot influence either real or nominal variables of interest. A necessary condition for this is that the short nominal interest rate is constrained by its lower bound, typically zero. The paper considers two small analytical models, one...

Jim Tobin, who died on March 11, 2002 at the age of 84, was one of giants of economics of the second half of the twentieth century and the greatest macroeconomist of his generation. Tobin’s influence on macroeconomic theory is so pervasive - so much part of our professional ‘acquis’ - that...

We investigate the possible existence of asymmetries among Euro Area countries reactions to the European Central Bank monetary policy. Our analysis is based on a Structural Dynamic Factor model estimated on a large panel of quarterly variables including data on the aggregate Euro Area, as well...

This paper presents new empirical evidence on the cyclical behavior of US unemployment that poses a challenge to standard search and matching models. The correlation between cyclical unemployment and the cyclical component of labor productivity switched sign at the beginning of the Great...

We estimate the impulse response of key US macro series to the monetary policy shocks identified by Romer and Romer (2004), allowing the response to depend flexibly on the state of the business cycle. We find strong evidence that the effects of monetary policy on real and nominal variables are...

The standard New Keynesian model suffers from the so-called .macro-micro pricing conflict: in order to match the dynamics of inflation implied by macroeconomic data, the model needs to assume an average duration of price contracts which is much longer than what is observed in micro data. Here I...

I analyze optimal monetary policy in an economy with search and matching frictions in the labor market and staggered nominal wage and price contracts. In this framework, as opposed to the standard New Keynesian model, preset nominal wages need not have any effect on existing employment...

A vast empirical literature has documented delayed and persistent effects of monetary policy shocks on output. We show that this finding results from the aggregation of output impulse responses that differ sharply depending on the timing of the shock: when the monetary policy shock takes place...

Systematic differences in the timing of wage setting decisions among industrialized countries provide an ideal framework to study the importance of wage rigidity in the transmission of monetary policy. The Japanese Shunto presents the most well-known case of bunching in wage setting decisions:...

We estimate the impulse response of key US macro series to the monetary policy shocks identified by Romer and Romer (2004), allowing the response to depend flexibly on the state of the business cycle. We find strong evidence that the effects of monetary policy on real and nominal variables are...