In this paper, we continue our study on a general time-inconsistent stochastic linear-quadratic (LQ) control problem originally formulated in Hu, Jin and Zhou (2012). We derive a necessary and sufficient condition for equilibrium controls via a flow of forward-backward stochastic differential...

A large body of recent empirical work on inflation dynamics documents that current real variables (like unemployment or output gaps) have little explanatory power for future inflation. Motivated by these findings, I explore the properties of a wide class of models in which inflation expectations...

A large body of recent empirical work on inflation dynamics documents that current real variables (like unemployment or output gaps) have little explanatory power for future inflation. Motivated by these findings, I explore the properties of a wide class of models in which inflation expectations...

We reconsider the canonical model of price setting with menu costs by Ball and Romer (1990). Their original model exhibits multiple equilibria for nominal aggregate demand shocks of intermediate size. By abandoning Ball and Romer's (1990) assumption that demand shocks are common knowledge among...

We study the propagation of monetary shocks in a sticky-price general-equilibrium economy where the firms' pricing strategy feature a complementarity with the decisions of other firms. In a dynamic equilibrium the firm's price-setting decisions depend on aggregates, which in turn depend on...