Using a standard dynamic general equilibrium model, we show that the interaction of staggered nominal contracts with hyperbolic discounting leads to inflation having significant long-run effects on real variables.

The Friedman rule states that steady-state welfare is maximized when there is deflation at the real rate of interest. Recent work by Khan et al (2003) uses a richer model but still finds deflation optimal. In an otherwise standard new Keynesian model we show that, if households have hyperbolic...

Milton Friedman's contributions to and influence on macroeconomics are discussed, beginning with his work on the consumption function and the demand for money, not to mention monetary history, which helped to undermine the post World War 2 Keynesian consensus in the area. His inter-related...

Milton Friedman's contributions to and influence on macroeconomics are discussed, beginning with his work on the consumption function and the demand for money, not to mention monetary history, which helped to undermine the post World War 2 "Keynesian" consensus in the area. His inter-related...

This paper introduces the Bank of England's new forecasting platform and provides examples of how it can be applied to practical forecasting problems. The platform consists of four components: COMPASS, a structural central organising model; a suite of models, used to fill in the gaps in the...

Many commentators have argued that if the Federal Reserve had followed a stricter monetary policy earlier this decade when the housing bubble was forming, and if Congress had not deregulated banking but had imposed tighter financial standards, the housing boom and bust - and the subsequent...

How important is the effect of the interest rate Zero Lower Bound (ZLB) on the severity of the U.S. Great Recession? We tackle this question using an incomplete markets New Keynesian model, with a ZLB on the nominal interest rate and a borrowing constraint tied to asset price. We solve the model...

The Friedman rule states that steady-state welfare is maximized when there is deflation at the real rate of interest. Recent work by Khan et al. (2003) uses a richer model but still finds deflation optimal. In an otherwise standard new Keynesian model we show that, if households have hyperbolic...

The Friedman rule states that steady-state welfare is maximized when there is deflation at the real rate of interest. Recent work by Khan et al. (2003) uses a richer model but still finds deflation optimal. In an otherwise standard new Keynesian model we show that, if households have hyperbolic...

The Friedman rule states that steady-state welfare is maximized when there is deflation at the real rate of interest. Recent work by Khan et al (2003) uses a richer model but still finds deflation optimal. In an otherwise standard new Keynesian model we show that, if households have hyperbolic...