The contribution of this paper is twofold. First, a thorough presentation of the state of the art of the New Keynesian Macroeconomic model is provided. A discussion of its empirical caveats follows and some recent extensions of the standard model are evaluated in more detail. Second, a key...

In this paper, we study Ramsey-optimal fiscal and monetary policy in a mediumscale model of the U.S. business cycle. The model features a rich array of real and nominal rigidities that have been identified in the recent empirical literature as salient in explaining observed aggregate...