As such, this represents a DSGE framework that can be used to analyze the effects of macroeconomic shocks, as well as systematic and unsystematic monetary policy on the yield curve.

What inflation rate should central banks target? Following the work of Bils and Klenow (2004), who were the first to document the large amount of heterogeneity in the frequency of price changes across different categories of goods and services in the United States, a growing literature has...