In our dynamic optimizing sticky price model, agents are heterogeneous with regard to their age and their productivity. We find that the business cycle dynamics in the OLG model in response to both a technology shock and a monetary shock are similar, but not completely identical to those found...

This study develops a stylised DSGE model, that departs in one aspect: it replaces the general equilibrium approach by disequilibrium economics. In this way, richer macroeconomic adjustment dynamics result, as it is not necessary to assume that goods and labour markets continuously clear. The...

This paper tests the ability of popular New Keynesian models, which are traditionally used to study monetary policy and business cycles, to match the data regarding a key channel for monetary transmission: the dynamic interactions between macroeconomic variables and their corresponding...

Over the past 20 years, macroeconomists have incorporated more and more results from behavioral economics into their models. We argue that doing so has helped fixed deficiencies with standard approaches to modeling the economy-for example, the counterfactual absence of inertia in the standard...

A persistent criticism of general equilibrium models of monetary policy which incorporate nominal inertia in the form of the New Keynesian Phillips Curve (NKPC) is that they fail to capture the extent of inflation inertia in the data. In this paper we derive a general equilibrium model based on...

This paper analyses the effects of taxation in New Keynesian economics. The results show that taxes contribute to price and wage stickiness and, moreover, that the resulting fluctuations in welfare are magnified by the presence of taxes. These results are at odds with the old Keynesian idea of...

What are the effects of beliefs, sentiment, and uncertainty, over the business cycle? To answer this question, we develop a behavioral New Keynesian macroeconomic model, in which we relax the assumption of rational expectations. Agents are, instead, boundedly rational: they have a...

This paper estimates a New Keynesian model extended to include heterogeneous expectations, to revisit the evidence that postwar US macroeconomic data can be explained as the outcome of passive monetary policy, indeterminacy, and sunspot-driven fluctuations in the pre-1979 sample, with a switch...

This paper investigates the effects of uncertainty on the macro economy by replicating its micro effects on individual subjective beliefs. In our model, the representative household has smooth ambiguity preferences and is uncertain about which scenario the economy will be in the next period:...