We explore the role of real wage dynamics in a New Keynesian business cycle model with search and matching frictions in the labor market. Both job creation and destruction are endogenous. We show that the model generates counterfactual inflation and labor market dynamics. In particular, it fails...

This paper investigates determinacy of equilibrium in a canonical New Keynesian model under different monetary and fiscal policy rules. It is shown that a simple monetary rule that responds aggressively to inflation is a necessary condition for equilibrium determinacy, when fiscal policy is...

The bursting of the Japanese bubble economy in the early 1990s put the stage for a lasting lowzero-, and negative-interest rate environment, which fundamentally changed the business environment for the Japanese commercial banks. On the income side, with interest margins becoming increasingly...

We derive necessary and suffcient conditions for simple monetary policy rules that guarantee equilibrium determinacy in the New Keynesian monetary model. Our modeling framework is derived from a fully specified optimization model that is still amenable to analytical characterisation. The...