-pricing theory, is calibrated to analyze the effects of monetary policy and financial innovation. We show that inflation can raise … output, employment and investment, plus improve housing and stock markets. For the baseline calibration, optimal inflation is …

We define the Fisherian Golden Rule measure of bond market inflation expectations as the difference between bond rates … and trend real GDP growth rates. The concept is based on the Fisherian theory that an increase in longer-term inflation … rates of interest would equal the growth rate of real output. We compare the bond market inflation experiences of 13 …

-recession trend, suggesting hysteresis. Second, while inflation has decreased, it has decreased less than anticipated, suggesting a … breakdown of the relation between inflation and activity. To examine the first, we look at 122 recessions over the past 50 years … unemployment on inflation, for given expected inflation, decreased until the early 1990s, but has remained roughly stable since …