The fiscal theory of the price level says that the price level can be made determinate if the government uses fiscal policies such that government liabilities explode unless the price in the first period is at the "right" level. The policy implications are disturbing, as they call for rather...

The Taylor principle is quite usually considered as a central condition for price determinacy. Recently, however, this has been questioned on several grounds, notably because (i) this condition is a condition for local determinacy, not global determinacy (ii) it has been derived in "Ricardian"...

Many recent discussions on the conduct of monetary policy through interest rate rules have given a very central role to inflation, both as an objective and as an intermediate instrument. We want to show that other variables like employment can be as important or even more. For that we construct...

We show that Keynesian multiplier effects can be obtained in dynamic optimizing models if one combines both price rigidities and a "non Ricardian" framework where, due for example to the birth of new agents, Ricardian equivalence does not hold.

The purpose of this article is to characterize optimal interest rate rules in the framework of a dynamic stochastic general equilibrium model, and notably to scrutinize the "Taylor principle", according to which the nominal interest rate should respond more than one for one to inflation. This...

Abstract This article studies a new class of models which synthesize the two traditions of general equilibrium with nonclearing markets and imperfect competition on the one hand, and dynamic stochastic general equilibrium (DSGE) models on the other hand. This line of models has become a central...

It has often been found difficult to generate a liquidity effect (i.e. a negative effect of monetary injections on the nominal interest rate) in the traditional "Ricardian" stochastic dynamic model with a single infinitely lived household. We show that moving to a non Ricardian environment where...

A most wellknown determinacy condition on interest rate rules is the "Taylor principle", which says that nominal interest rates should respond more than hundred percent to inflation. Unfortunately, notably because interest rates must be positive, the Taylor principle cannot be satisfied for all...

We construct in this paper a dynamic general equilibrium model which displays the central features of the IS-LM model, and notably an income multiplier greater than one, so that crowding out does not occur. It appears that the key to this result is the conjunction of two features of our model:...

Are prices less sticky when markets are more competitive? Our intuition would naturally lead us to give an affirmative answer to that question. But we first show that DSGE models with staggered price or wage contracts have actually the opposite and paradoxical property, namely that price...