This paper examines the role of habit persistence in consumption in explaining persistent responses of inflation and output to money growth shocks. A monetary stochastic dynamic general equilibrium (DGE) model with a money-in-the-utility-function (MIU-) setup is augmented by habit formation in...

This paper considers the implications of adding capital as a factor of production in a stochastic DGE model with sticky prices. Particular attention is given to the role of money demand and to the form of the utility function. I consider cash-in-advance- (CIA) as well as...

Recently macroeconomists have intensified their efforts to develop models that are able to generate persistent reactions of real variables to monetary shocks in stochastic DGE models with nominal rigidities. This has proven to be quite difficult in models with price staggering only. Most papers...

This paper aims at providing macroeconomists with a detailed exposition of the New Keynesian DSGE model. Both the sticky price version and the sticky information variant are derived mathematically. Moreover, we simulate the models, also including lagged terms in the sticky price version, and...

I summarize recent progress made in the literature on inflation dynamics. This has been a very productive area of research due to the development of the so-called New Keynesian model and the availability of new macroeconomic and microeconomic evidence. Nevertheless, a number of problems still...

We build a two-country version of the model in Gali & Monacelli (2005), which extends for a small open economy the new Keynesain DSGE model used as tool for monetary policy analysis in closed economies. A distinctive feature of the model is that the terms of trade enters directly into the new...