This paper considers the design of macroeconomic policies in the face of uncertainty. In recent years, several economists have advocated that when policymakers are uncertain about the environment they face and find it difficult to assign precise probabilities to the alternative scenarios that...

This paper examines whether tasking central banks with leaning against asset booms can conáict with their existing mandates to stabilize goods prices and output. The paper embeds the Harrison and Kreps (1978) model of speculative booms in a monetary model based on Rocheteau, Weill, and Wong...

This review considers the design of macroeconomic policies in the face of uncertainty. In recent years, several economists have advocated that, when policy makers are uncertain about the environment they face and find it difficult to assign precise probabilities to the alternative scenarios that...

Central banks create money to lend during credit crunches, which might lead to inflation. We examine whether the two key functions of central banks—price stability and last-resort lending—conflict. We develop a nominal model of bank runs à la Diamond and Dybvig (1983) in which individuals...

Central banks create money to lend during credit crunches, which might lead to inflation. We examine whether the two key functions of central banks - price stability and last-resort lending - conflict. We develop a nominal model of bank runs à la Diamond and Dybvig (1983) in which individuals...

This paper examines whether tasking central banks with leaning against asset booms can conflict with their existing mandates to stabilize goods prices and output. The paper embeds the Harrison and Kreps (1978) model of speculative booms in a monetary model based on Rocheteau, Weill, and Wong...

Galí (2014) showed that a monetary policy rule that raises interest rates in response to bubbles can paradoxically lead to larger bubbles. This comment shows that a central bank that wants to dampen bubbles can always do so by raising interest rates aggressively enough. This result is different...

Galí (2014) showed that a monetary policy rule that raises interest rates in response to bubbles can paradoxically lead to larger bubbles. This comment shows that a central bank that wants to dampen bubbles can always do so by raising interest rates aggressively enough. This result is different...