We analytically characterize optimal monetary policy for an augmented New Keynesian model with a housing sector. With rational private sector expectations about housing prices and inflation, optimal monetary policy can be characterized by a standard 'target criterion' that refers to inflation...

We estimate a Heterogeneous-Agent New Keynesian model with sticky household expectations that matches existing microeconomic evidence on marginal propensities to consume and macroeconomic evidence on the impulse response to a monetary policy shock. Our estimated model uncovers a central role for...

This paper estimates a New Keynesian model with new and old behavioral elements. Agents in the model exhibit cognitive discounting, or myopia: they discount variables far into the future at higher rates than typically implied in the benchmark model. We investigate the model under different...

How should central banks optimally aggregate sectoral inflation rates in the presence of imperfect labor mobility across sectors? We study this issue in a two-sector New-Keynesian model and show that a lower degree of sectoral labor mobility, ceteris paribus, increases the optimal weight on...

We derive closed-form solutions and sufficient statistics for inflation and GDP dynamics in multi-sector New Keynesian economies with arbitrary input-output linkages. Analytically, we decompose how production linkages (1) amplify the persistence of inflation and GDP responses to monetary and...

Central banks unexpectedly tightening policy rates often observe the exchange value of their currency depreciate, rather than appreciate as predicted by standard models. We document this for Fed and ECB policy days using eventstudies and ask whether an information effect, where the public...

The resurgence of inflation since the late 2021 is now accompanied by a reversal of prospects of growth, reviving fears of stagflation across the world (IMF 2022, World Bank 2022). In almost all accounts of the mounting stagflation threats a prominent role is played by the fall of households'...

This paper analyses an electricity market in which a monopolist that employs fossil-fuel base-load and peak-load technologies competes against a fringe of renewable energy (RE) generators. The optimal technology and electricity mix can be decentralised by levying technology-dependent capacity...