Most macroeconomic models for monetary policy analysis are approximated around a zero inflation steady state, but most central banks target inflation at a rate of about 2 percent. Many economists have recently proposed even higher inflation targets to reduce the incidence of the zero lower bound...

This paper shows that nominal rigidities in terms of price stickiness acts as a powerful supply-shock filter that reduces the overall economic instability. Considering a range of admissable values for price stickiness, the volatility of inflation, output and interest rate induced by technology...

Since the '80s the volatility of output growth and inflation experienced by several industrialized countries has remarkably declined, what has been dubbed the "Great Moderation". Various explanations have been proposed and likely all play some role. This paper shows that when an industrial...

This paper proves that a higher inflation target unanchors expectations, as feared by Fed Chairman Bernanke. It does so both asymptotically, because it shrinks the E-stability region when a central bank follows a Taylor rule, and in the transition phase, because it slows down the speed of...

We study the housing market using a partial "dis"-equilibrium dynamic model in which the rational expectations hypothesis is relaxed in favor of chartist-fundamentalist mechanism to allows for the endogenous development of bubbles. Our model is able to replicate the recent house price dynamics...