-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 …

In recent decades, advanced economies have experienced low and stable inflation and long periods of liquidity trap. We … which inflation is fixed and not determined by a forward-looking Phillips curve. With wealth in the utility, the Euler … equation is modified and we can obtain steady-state equilibria with a liquidity trap, positive inflation, and labor market …

low but still positive rates of inflation, provides an adequate approximation in welfare terms to the alternative of …

interpreted, first and foremost, as a commitment device. In our setting, a monetary target helps anchoring inflation and inflation … well as a strong response to deviations of inflation from target and to the activity growth gap. In contrast, the response …

inflation. Our second example shows that a monetary policy that focuses too narrowly on inflation may inadvertently contribute …