I provide an overview of recent developments in monetary economics, with an emphasis on extensions of the New Keynesian framework that assume a zero lower bound on the short term nominal rate, as well as models with household heterogeneity

We study how changes in the value of the steady-state real interest rate affect the optimal inflation target, both in the U.S. and the euro area, using an estimated New Keynesian DSGE model that incorporates the zero (or effective) lower bound on the nominal interest rate. We find that this...