The Friedman rule states that steady-state welfare is maximized when there is deflation at the real rate of interest. Recent work by Khan et al. (2003) uses a richer model but still finds deflation optimal. In an otherwise standard new Keynesian model we show that, if households have hyperbolic...

We contribute to the recent debate on the instability of the slope of the Phillips curve by offering insights from a flexible time-varying instrumental variable approach robust to weak instruments. Our robust approach focuses directly on the Phillips curve and allows general forms of...