We develop a DSGE model in which the policy rate signals the central bank.s view about macroeconomic developments to incompletely informed price setters. The model is estimated with likelihood methods on a U.S. data set including the Survey of Professional Forecasters as a measure of price...

We consider an incomplete-markets economy with capital accumulation and endogenous labor supply. Individuals face countercyclical idiosyncratic labor and asset risk. We derive conditions under which the aggregate allocations and price system can be found by solving a representative agent...

We examine the sources of macroeconomic economic fluctuations by estimating a variety of medium-scale DSGE models within a unified framework that incorporates regime switching both in shock variances and in the inflation target. Our general framework includes a number of different model features...

This paper offers a framework to study commitment and cooperation issues in games with multiple policymakers. To reconcile some puzzles in the recent literature on the nature of policy interactions among nations, we prove that games characterized by different commitment and cooperation schemes...

The Bank of Amsterdam, founded in 1609, was the first public bank to offer accounts not directly convertible to coin. As such, it can be described as the first true central bank. The debut of central bank money did not result from any conscious policy decision, however, but instead arose almost...

This paper computes welfare-maximizing monetary and fiscal policy rules in a real business cycle model augmented with sticky prices, a demand for money, taxation, and stochastic government consumption. We consider simple feedback rules whereby the nominal interest rate is set as a function of...

The possibility of regime shifts in monetary policy can have important effects on rational agents' expectation formation and equilibrium dynamics. In a dynamic stochastic general equilibrium model where the monetary policy rule switches between a dovish regime that accommodates inflation and a...

Davig and Leeper (2007) have proposed a condition they call the generalized Taylor principle to rule out indeterminate equilibria in a version of the New Keynesian model, where the parameters of the policy rule follow a Markov-switching process. We show that although their condition rules out a...

We examine the impact of different degrees of fiscal feedback on debt in an economy with nominal rigidities where monetary policy is optimal. We look at the extent to which different degrees of fiscal feedback enhance or detract from the ability of the monetary authorities to stabilize output...

The inference for hidden Markov chain models in which the structure is a multiple-equation macroeconomic model raises a number of difficulties that are not as likely to appear in smaller models. One is likely to want to allow for many states in the Markov chain without allowing the number of...