We use a standard quantitative business cycle model with nominal price and wage rigidities to estimate two measures of economic ineffciency in recent U.S. data: the output gap - the gap between the actual and effcient levels of output - and the labor wedge - the wedge between households'...

We investigate, theoretically and empirically, the relationship between monetary policy and the term structure of interest rates. In particular, we show in a dynamic macroeconomic model that if monetary policy reveals information about economic developments, interest rates of all maturities move...

Using an empirical New-Keynesian model with optimal discretionary monetary policy, we estimate key parameters - the central bank's preference parameters; the degree of forward-looking behavior in the determination of inflation and output; and the variances of inflation and output shocks-to match...

We use a quantitative model of the U.S. economy to analyze the response of long-term interest rates to monetary policy, and compare the model results with empirical evidence. We find that the strong and time-varying yield curve response to monetary policy innovations found in the data can be...

We study the effects of model uncertainty in a simple New-Keynesian model using robust control techniques. Due to the simple model structure, we are able to find closed-form solutions for the robust control problem, analysing both instrument rules and targeting rules under different timing...

We use robust control techniques to study the effects of model uncertainty on monetary policy in an estimated, semi-structural, small-open-economy model of the U.K. Compared to the closed economy, the presence of an exchange rate channel for monetary policy not only produces new trade-offs for...

Robust control allows policymakers to formulate policies that guard against model misspecification. The principal tools used to solve robust control problems are state-space methods (see Hansen and Sargent, 2006, and Giordani and Soderlind, 2004). In this paper we show that the structural-form...

Using an empirical New-Keynesian model with optimal discretionary monetary policy, we estimate key parameters - the central bank's preference parameters; the degree of forward-looking behavior in the determination of inflation and output; and the variances of inflation and output shocks - to...

This paper studies how a central bank's preference for robustness against model misspecification affects the design of monetary policy in a New-Keynesian model of a small open economy. Due to the simple model structure, we are able to solve analytically for the optimal robust policy rule, and we...

Economic outcomes in dynamic economies with forward-looking agents depend crucially on whether or not the central bank can precommit, even in the absence of the traditional "inflation bias." This paper quantifies the welfare differential between precommitment and discretionary policy in both a...