Estimation of forward-looking interest rate rules is ubiquitous in the context of developed economy central banks. This paper considers the five countries in Latin America that have adopted the Inflation Targeting framework and performs estimations of forward-looking rules via i) standard...

We study how determinacy and learnability of global rational expectations equilibrium may be accected by monetary policy in a simple, two country, New Keynesian framework. The two blocks may be viewed as the U.S. and Europe, or as regions within the euro zone. We study cases in which optimal...

We analyze the trade-offs faced by a monetary policy authority when a value added tax rate is increased. In the short run, such an increase acts as a cost push shock from the perspective of a central bank that is concerned with stabilizing the welfare relevant output gap. We develop a New...

This paper studies the effects of monetary policy in a model with demand shocks driven by shifts in consumer expectations. I ask wether monetary policy can offset these aggregate demand disturbances and wether this offsetting is socially desirable. I consider an environment with dispersed...

We investigate co-movements in inflation dynamics within and across euro area regions and find it important for monetary policy to monitor regional inflation dynamics to enhance the understanding of aggregate inflation. We employ a model where regional inflation dynamics are explained by common...

We examine linear-quadratic (LQ) approximation of stochastic dynamic optimization problems in macroeconomics (and elsewhere), in particular in policy analysis using Dynamic Stochastic General Equilibrium (DSGE) models. We first define the problem that is solved by a social planner, given that...

We analyze the microfoundations of the Phillips curve, a key relationship in general macroeconomics and models of monetary policy in particular. The form in current widespread use includes both forward looking expected inflation and lagged inflation. The presence of lagged inflation is necessary...

This paper considers the evidence of “near-rationality†in household inflation expectations, as described by Akerlof, Dickens, and Perry (2000), hereafter ADP. According to ADP, the economic incentive to anticipate inflation varies from agent to agent, and as inflation falls, some...

We study the the emergence of multiple equilibria in models with capital and bonds under various monetary and fiscal policies. We show that the presence of capital is indeed another independent source of local and global multiplicites, even under active policies that yield local determinacy. We...

We investigate the effects of U.S. monetary policy on asset prices using a high-frequency event-study analysis. We test whether these effects are adequately captured by a single factor—changes in the federal funds rate target—and find that they are not. Instead, we find that two...