Many researchers have found that the lagged interest rate enters estimated monetary policy rules with overwhelming significance, suggesting that policy adjusts gradually to changes in economic conditions. However, Rudebusch (2002) argues that the lagged interest rate is not a fundamental...

This paper presents a Dynamic New Keynesian model with wealth effects to study the performance of monetary policy under Ricardian and non-Ricardian fiscal regimes. The model is calibrated to euro area quarterly data. The interactions between fiscal policy and interest rate rules have critical...

This paper studies optimal monetary policy in an economy where firms rely heavily on external funds to finance operational costs. In the model, financial contracts are subject to agency problems and firms can possibly default on borrowed funds. Financial frictions have two separate effects on...

This paper examines the performances of the past five Federal Reserve chairmen using optimal control techniques and a macroeconometric model. Each chairman is evaluated in two ways. The first way is comparing the actual performance of the economy under his term relative to what the performance...

We investigate the optimality of monetary policy targeting rules in a macroeconomic model based on explicit micro-foundations for intrinsic persistence in inflation and real output. For the corresponding social welfare loss function to be minimized by the central bank, inertia arises...

This paper explores theoretically and empirically the view that Taylor rules are often nonlinear due to asymmetric central bank preferences, and that the nature of these asymmetries changes across different policy regimes. The theoretical model uses a standard new Keynesian framework to...