This paper documents changes in the cyclical behavior of nominal data series that appear after 1979:Q3 when the Federal Reserve implemented a policy to lower the inflation rate. Such changes were not apparent in real variables. A business cycle model with impulses to technology and a role for...

This paper estimates and simulates a sticky-price dynamic stochastic general-equilibrium model with a financial accelerator, a la Bernanke, Gertler, and Gilchrist (1999), to assess the importance of the financial accelerator mechanism in fitting the data and its role in the amplification and...

This paper considers a sticky-price model with heterogeneous households and financial frictions. Financial frictions lead to imperfect risk-sharing among households with idiosyncratic labor incomes. I study implications of imperfect risk-sharing for optimal monetary policy by documenting its...

This article studies under which conditions interest rate rules "à la Taylor" results, which are standard in the traditional "Ricardian" taxation, Financial constraints. single dynasty of consumers: (1) a pure interest rate peg leads to nominal price indeterminacy; (2) a strong reaction...

We determine the optimal degree of price inflation volatility when nominal wages are sticky and the government uses state-contingent inflation to finance government spending. We address this question in a well-understood Ramsey model of fiscal and monetary policy, in which the benevolent planner...

We characterize the optimal sequential choice of monetary policy in economies with either nominal or indexed debt. In a model where nominal debt is the only source of time inconsistency, the Markov-perfect equilibrium policy implies the progressive depletion of the outstanding stock of debt,...

This paper examines the stochastic relationship between money and capital in an economy with spatially separated markets. The new ingredient of the model is that trades between markets may be desirable but are eliminated by market separation. When this cross-market friction is operative,...

The purpose of this paper is study the effect of monetary policy on asset prices. We study the properties of a monetary model in which a real asset is valued for its rate of return and for its liquidity. We show that money is essential if and only if real assets are scarce, in the precise sense...

This paper claims that anticipations of a promised massive future government bailout of owners of fallen bank shares suddenly caused a big jump in inflation in Israel in October 1983. That month, the government promised that four or five years later it would compensate innocent people for the...

We introduce household production and the production of houses (construction) into a monetary model. Theory predicts inflation, as a tax on market activity, encourages substitution into household production and hence investment in housing. In the model, the stock and appropriately-deflated price...