This paper establishes that one can generally obtain a purely quadratic approximation to the unconditional expectation of social welfare when the steady-state is distorted. A specific example is provided employing a canonical New Keynesian model. Unlike in the non-distorted steady state case,...

We develop a simple and intuitive approach for analytically deriving unconditionally optimal (UO) policies, a topic of enduring interest in optimal monetary policy analysis. The approach can be employed to both general linear-quadratic problems and to the underlying non-linear environments. We...

In this paper we study the impact of a temporary lack of credibility in a transition to price stability. We quantify the effects of a period of disinflation on temporary output losses, and the impact of the lack of credibility on the optimal speed on disinflation. We demonstrate that the...

We discuss the issue of time consistency of monetary policy. We develop a simple and intuitive procedure to derive analytically the unconditionally optimal (UO) policy in a general linear-quadratic set-up, a perspective stressed by Taylor (1979) and Whiteman (1986). We compare the UO perspective...

Tiny changes in the American monetary policy can have dramatic effects on the rest of the world because of dollar's double role of national and international currency. This is the Triffin dilemma. The paper shows how it works through three examples: price of commodities, dollarization, and the...

The Greek economy experienced a boom until 2007, followed by a prolonged depression resulting in a 25 percent shortfall of GDP by 2016. Informed by a detailed analysis of macroeconomic patterns in Greece, we estimate a rich dynamic general equilibrium model to assess quantitatively the sources...

Standard consumption-investment theory predicts counter-cyclical (pro-cyclical) behavior of household (corporate) credit whereby households' consumption smoothing and firms' investment motives are aligned. Counter to the theoretical symbiosis consistent with U.S. data, we demonstrate not only in...

The creation of the Economic and Monetary Union (EMU) has not brought significant gains to the Portuguese economy in terms of real convergence with wealthier eurozone countries. We analyze the causes of the underperformance of the Portuguese economy in the last decade, discuss its growth...

The withdrawal of foreign capital from emerging countries at the height of the recent financial crisis and its quick return sparked a debate about the impact of capital flow surges on asset markets. This paper addresses the response of property prices to an inflow of foreign capital. For that...

The creation of the Economic and Monetary Union (EMU) has not brought significant gains to the Portuguese economy in terms of real convergence with wealthier eurozone countries. We analyze the causes of the underperformance of the Portuguese economy in the last decade, discuss its growth...