Central banks throughout the world predict inflation with new-Keynesian models where, after a shock, the unemployment rate returns to its so called "natural rate'. That assumption is called the Natural Rate Hypothesis (NRH). This paper reviews a body of work, published over the last decade,...

This paper is part of a broader project that provides a microfoundation to the General Theory of J.M. Keynes. I call this project 'old Keynesian economics' to distinguish it from new-Keynesian economics, a theory that is based on the idea that to make sense of Keynes we must assume that prices...

This paper presents a theory of the monetary transmission mechanism in a monetary version of Farmer's (2009) model in which there are multiple equilibrium unemployment rates. The model has two equations in common with the new-Keynesian model; the optimizing IS curve and the policy rule. It...

This paper studies the connection between the stock market and the unemployment rate. I establish three facts. First, the log of the real value of the S&P 500 and the log of a logistic transformation of the unemployment rate are non-stationary cointegrated series. Second, the stock market...

This paper develops a rational expectations model with multiple equilibrium unemployment rates where the price of capital may be unbounded above. I argue that this property is an important feature of any rational-agent explanation of a financial crisis, since for the expansion phase of the...

This paper uses a model with a continuum of equilibrium steady state unemployment rates to explore the effectiveness of fiscal policy. The existence of multiple steady state equilibria is explained by the presence of search and recruiting costs. I use the model to explain the current financial...