Central bankers’ conventional wisdom suggests that nominal interest rates should be raised to implement a lower inflation target. In contrast, I show that the standard New Keynesian monetary model predicts that nominal interest rates should bedecreased to attain this goal. Real interest rates,...

While consumption habits have been utilised as a means of generating a hump shapedoutput response to monetary policy shocks in sticky-price New Keynesian economies,there is relatively little analysis of the impact of habits (particularly, external habits) onoptimal policy. In this paper we...

In practice, central banks have been confronted with a trade-off between stabilising inflation and output when dealing with rising oil prices. This contrasts with the result in the standard New Keynesian model that ensuring complete price stability is the optimal thing to do, even when an oil...

[...]This article explores the inflation puzzle andinvestigates whether compensation has acted as either atemporary restraint on inflation or as the underlying sourceof a new inflation regime.2 After reviewing the recent behavior of inflation, we specify and estimate a traditionalprice-inflation...

This paper studies a overlapping generations economy with capital where limitedcommunication and stochastic relocation create an endogenous transactions role for…at money. We assume a production function with a knowledge-externality (Romer-style) that nests economies with endogenous growth (AK...

In this paper we present an extension of the Taylor model with staggered wages inwhich wage-setting is also influenced by reference norms (i.e. by benchmark wages).We show that reference norms can considerably increase the persistence of inflationand the extent of real wage rigidity but that...

This paper estimates a structural model of multiple-species harvesting costs in the easternGulf of Mexico reef fish fishery. The calibrated model is used to predict fleet size, vessellevelharvesting activity and fleet-wide revenues and costs that are expected under a proposedindividual fishing...

In this paper we propose a novel methodology to analyze optimal policies undermodel uncertainty in micro-founded macroeconomic models. As an application weassess the relevant sources of uncertainty for the optimal conduct of monetary policy within (parameter uncertainty) and across models...

This paper analyzes German and Spanish fiscal policy using simple policy rules. We choose Germany and Spain, as both are Member States in the European Monetary Union (EMU) and underwent considerable increases in public debt in the early 1990s. We focus on the question, how fiscal policy behaves...