Models dealing with monetary policy are generally based on microfoundations that characterize the behaviour of representative agents (households and firms). To explain the representative consumer behaviour, it is generally assumed a utility function in which the intertemporal elasticity of...

The standard new Keynesian monetary policy problem is, in its original presentation, a linear model. As a result, only three possibilities are admissible in terms of long term dynamics: the equilibrium may be a stable node, an unstable node or a saddle point. Fixed point stability (a stable...

Keynes’ original intention in introducing the concept of a liquidity trap was to explain the reason why persistent large amounts of unutilized resources were generated during the Great Depression. This paper shows that this type of phenomenon cannot be explained in the framework of a...

We use disaggregated data on the components of private fixed investment (PFI) to estimate industry-level responses of real investment and capital prices to unanticipated monetary policy. The response functions derive from a restricted large-scale VAR estimated over 1959-2007. Our results point...

In the paper we propose an assessment of the role of financial innovation in shaping US macroeconomic dynamics. We extend an existing model by Christiano, Eichenbaum and Evans which studied the transmission of monetary policy impulses to business and corporate sector financing variables just...

This paper develops a simple, consistent methodology for generating empirically realistic forward guidance simulations using existing macroeconomic models by modifying expectations about policy announcements. The main advantage of our method lies in the exact preservation of all other shock...

We study alternative monetary policy strategies in the presence of the lower bound on nominal interest rates and a low equilibrium real rate using an estimated DSGE model for the euro area. We demonstrate that simple feedback rules that implement inflation targeting result in a binding lower...

We construct an endogenous growth model with new Keynesian-type sticky prices and wages. In this model, monetary policy affects long-run output growth. We characterize the optimal operational monetary policy rule in this economy. We find that even though stabilization of output growth increases...

We study alternative monetary policy strategies in the presence of the lower bound on nominal interest rates and a low equilibrium real rate using an estimated DSGE model for the euro area. We find that simple feedback rules that implement inflation targeting result in a binding lower bound...

In this paper, we explore the role of labor markets for monetary policy in the euro area in a New Keynesian model in which labor markets are characterized by search and matching frictions. We first investigate to which extent a more flexible labor market would alter the business cycle behaviour...