We examine the sources of macroeconomic fluctuations by estimating a variety of richly parameterized DSGE models within a unified framework that incorpo- rates regime switching both in shock variances and in the inflation target. We propose an efficient methodology for estimating...

We construct explicit equilibria for strategic market games used to model an economy with fiat money, one nondurable commodity, countably many time- periods, and a continuum of agents. The total production of the commodity is a random variable that fluctuates from period to period. In each...

The classical Fisher equation asserts that in a nonstochastic economy, the inflation rate must equal the difference between the nominal and real interest rates. We extend this equation to a representative agent economy with real uncertainty in which the central bank sets the nominal rate of...

We study the effects of monetary shocks in a model of state-dependent price and wage adjustment based on "control costs". Suppliers of retail goods and of labor are both monopolistic competitors that face idiosyncratic productivity shocks and nominal rigidities. Stickiness arises because precise...

With 30% of the world's investment grade sovereign bonds trading at sub-zero yields, there is a growing acceptance that negative interest rates are the 'new normal.' Even very low probabilities of sustained negative interest rates in the future leads to incredibly high Expected Values for...

We study the effects of monetary shocks in a model of state-dependent price and wage adjustment based on “control costs”. Suppliers of retail goods and of labor are both monopolistic competitors that face idiosyncratic productivity shocks and nominal rigidities. Stickiness arises because...

We study the effects of monetary shocks in a model of state-dependent price and wage adjustment based on “control costs”. Suppliers of retail goods and of labor are both monopolistic competitors that face idiosyncratic productivity shocks and nominal rigidities. Stickiness arises because...

The present article is an attempt to reconstruct a macro-dynamic theory of the monetary economy on the basis of the theory of monopolistically competitive firms formulated as a micro-foundation for the decentralized price mechanism. It shows how the micro-founded theorization of the very...