This paper develops two models, one involving risk neutrality and the other risk aversion, which suggest that inflation … evidence supports the hypothesis that inflation uncertainty affects interest rates. Interpreted in terms of the risk neutral … positive impact on the expected real rate. If the results are interpreted in terms of the risk averse model, inflation …

external instruments produce responses in output and inflation consistent with both textbook theory and conventional monetary …

econometric issues are addressed including estimation of the number of dynamic factors and tests for the factor restrictions …

of banks argue that compensation for bearing systematic risk is not part of bank output. We apply these models and find …

permit estimation using standard Bayesian techniques. Applying our framework to an estimated New-Keynesian business cycle …