The modern theory of monetary policy emphasizes the management of expectations. In New Keynesian models frequently used for policy evaluation it is well understood that it is not so much the current interest rate, but instead anticipated movements in future interest rates that are central to...

It has been argued that existing DSGE models cannot properly account for the evolution of key macroeconomic variables during and following the recent great recession, and that models in which inflation depends on economic slack cannot explain the recent muted behavior of inflation, given the...