Can monetary policy guide expectations toward desirable outcomes when equilibrium and welfare are sensitive to alternative, commonly held rational beliefs? This paper studies this question in an exchange economy with endogenous debt limits in which dynamic complementarities between dated debt...

We formulate the central bank's problem of selecting an optimal long-run inflation rate as the choice of a distorting tax by a planner who wishes to maximize discounted utility for a heterogeneous population of infinitely-lived households in an economy with constant aggregate income. Households...

We study a theory in which households borrow during the first half of a 241-period life cycle as part of a DSGE. Households confront a persistent regime-switching process on aggregate labor productivity growth. When the economy switches to the high growth regime, there is more borrowing based on...

The U.S economy has accumulated in recent years seemingly excessive levels of household debt. U.S monetary policy has responded to the situation by keeping real interest rates low. Critics of the low real interest rate policy contend that such a policy helps borrowers and punishes savers, thus...

Presented at Indiana University.

Presented at New Perspectives on Monetary Policy Design. Sponsored by the Bank of Canada and the Centre De Recerca en Economia Internacional. Barcelona, Spain.

Presented at Indiana University.

Presented at New Perspectives on Monetary Policy Design. Sponsored by the Bank of Canada and the Centre De Recerca en Economia Internacional. Barcelona, Spain.

Aggregate time series provide evidence of short term dynamic adjustment that appears to be governed by complex or negative real eigenvalues. This finding is at odds with the predictions of reasonably parameterized, convex one-sector growth models with complete markets. We study life cycle...