It is argued that learnability/E-stability is a necessary condition for a RE solution to be plausible. A class of linear models considered by Evans and Honkapohja (2001) is shown to include all models of the form used by King and Watson (1998) and Klein (2000), which permits any number of lags,...

The following arguments are developed: (i) models without monetary aggregates do not imply that inflation is a non-monetary phenomenon and are not necessarily non-monetary models; (ii) theoretical considerations suggest that such models are misspecified, but the quantitative significance of this...

Linear RE models typically possess a multiplicity of solutions. Consider, however, the requirement that the solution coefficients must not be infinitely discontinuous in the model's structural parameters. In particular, we require that the solutions should be continuous in the limit as those...

The paper reconsiders the role of money and banking in monetary policy analysis by including a banking sector and money in an optimizing model otherwise of a standard type. The model is implemented quantitatively, with a calibration based on U.S. data. It is reasonably successful in providing an...