We study identification in a class of three-equation monetary models. We argue that these models are typically not identified. For any given exactly identified model, we provide an algorithm that generates a class of equivalent models that have the same reduced form. In our first two examples we...

The recent macroeconomic literature stresses the importance of managing heterogeneous expectations in the formulation of monetary policy. We use a stylized macro model of Howitt (1992) to investigate inflation dynamics under alternative interest rate rules when agents have heterogeneous...

Expectations play a central role in modern macroeconomics. The econometric learning approach, in line with the cognitive consistency principle, models agents as forming expectations by estimating and updating subjective forecasting models in real time. This approach provides a stability test for...

The recent macroeconomic literature stresses the importance of managing heterogeneous expectations in the formulation of monetary policy. We use a simple frictionless DSGE model to investigate inflation dynamics under alternative interest rate rules when agents have heterogeneous expectations...

This paper considers a prototypical monetary business cycle model for the U.S. economy, in which the equilibrium is undetermined if monetary policy is "inactive". In previous multivariate studies it has been common practice to restrict parameter estimates to values for which the equilibrium is...

We show that inflation disagreement, not just expected inflation, has an impact on nominal interest rates. In contrast to expected inflation, which mainly affects the wedge between real and nominal yields, inflation disagreement affects nominal yields predominantly through its impact on the real...

We show theoretically that inflation disagreement drives a wedge between real and nominal yields and raises their levels and volatilities. We demonstrate empirically that an inflation disagreement increase of one standard deviation raises real and nominal yields and their volatilities,...

The links between real and nominal bond risk premia and macroeconomic dynamics are explored analytically and quantitatively in a model with nominal rigidities and monetary policy. The interest-rate policy rule becomes a restriction linking real and nominal risk premia through endogenous...

The bond yield dynamics implied by a welfare-maximizing monetary policy and its credibility are explored in general equilibrium. Credibility is captured by a regime change from discretion to commitment. The policy determines the optimal output and inflation responses to a source of inflation...

Since the publication of Keynes' "General Theory of Employment, Interest, and Money" in 1936 many new ideas and solution concepts for macroeconomic problems emerged, disappeared, and were combined in order to appropriately describe macroeconomic phenomena. Nowadays, New Keynesian frameworks are...