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Stabilizing Expectations under Monetary and Fiscal Policy Coordination

Eusepi, Stefano; Preston, Bruce J. - 2008

This paper analyzes how the formation of expectations constrains monetary and fiscal policy design. Economic agents have imperfect knowledge about the economic environment and the policy regime in place. Households and firms learn about the policy regime using historical data. Regime uncertainty...

Persistent link: https://www.econbiz.de/10014214924

Learning the Fiscal Theory of the Price Level : Some Consequences of Debt Management Policy

Eusepi, Stefano - 2011

This paper examines how the scale and composition of public debt can affect economies that implement a combination of “passive” monetary policy and “active” fiscal policy. This policy configuration is argued to be of both historical and contemporary interest in the cases of the U.S. and...

Persistent link: https://www.econbiz.de/10013120094

Fiscal Foundations of Inflation : Imperfect Knowledge

Eusepi, Stefano - 2013

This paper proposes a theory of the fiscal foundations of inflation based on imperfect knowledge and learning. The theory is similar in spirit to, but distinct from, unpleasant monetarist arithmetic and the fiscal theory of the price level. Because the assumption of imperfect knowledge breaks...

Persistent link: https://www.econbiz.de/10013074021

Subjective Intertemporal Substitution

Crump, Richard K. - 2020

We estimate the elasticity of intertemporal substitution (EIS)—the response of expected consumption growth to changes …). This unique data set allows us to estimate the consumption Euler equation with no auxiliary assumptions on the properties … with the results of much of the literature. In addition, planned consumption displays excess sensitivity to expected income …

Persistent link: https://www.econbiz.de/10012856136

Fitting Observed Inflation Expectations

Del Negro, Marco - 2010

This paper provides evidence on the extent to which inflation expectations generated by a standard Christiano et al. (2005)/Smets and Wouters (2003)-type DSGE model are in line with what is observed in the data. We consider three variants of this model that differ in terms of the behavior of,...

Persistent link: https://www.econbiz.de/10013135443

Fundamental Disagreement about Monetary Policy and the Term Structure of Interest Rates

Cao, Shuo - 2020

Using a unique data set of individual professional forecasts, we document disagreement about the future path of monetary policy, particularly at longer horizons. The stark differences in short rate forecasts imply strong disagreement about the risk-return trade-off of longer-term bonds....

Persistent link: https://www.econbiz.de/10012828049

Tying Down the Anchor : Monetary Policy Rules and the Lower Bound on Interest Rates

Mertens, Thomas M. - 2019

This paper uses a standard New Keynesian model to analyze the effects and implementation of various monetary policy frameworks in the presence of a low natural rate of interest and a lower bound on interest rates. Under a standard inflation-targeting approach, inflation expectations will be...

Persistent link: https://www.econbiz.de/10012871223

Monetary Policy Frameworks and the Effective Lower Bound on Interest Rates

Mertens, Thomas M. - 2019

This paper applies a standard New Keynesian model to analyze the effects of monetary policy in the presence of a low natural rate of interest and a lower bound on interest rates. Under a standard inflation-targeting approach, inflation expectations will be anchored at a level below the inflation...

Persistent link: https://www.econbiz.de/10012867264

Exchange Rate Dynamics and Monetary Spillovers with Imperfect Financial Markets

Akinci, Ozge - 2019

We use a two-country New Keynesian model with financial frictions and dollar debt in balance sheets to investigate the foreign effects of U.S. monetary policy. Financial amplification works through an endogenous deviation from uncovered interest parity (UIP) arising from limits to arbitrage in...

Persistent link: https://www.econbiz.de/10012869554

Balance Sheets, Exchange Rates, and International Monetary Spillovers

Akinci, Ozge - 2019

We use a two-country New Keynesian model with balance sheet constraints to investigate the magnitude of international spillovers of U.S. monetary policy. Home borrowers obtain funds from domestic households in domestic currency, as well as from residents of the foreign economy (the United...

Persistent link: https://www.econbiz.de/10012899102