We estimate and compare two models, the Generalized Taylor Economy (GTE) and the Multiple Calvo model (MC), that have … to those of the standard models such as the Calvo and its popular variant, using the ad hoc device of indexation. The …

unanticipated shocks of equal size news shocks behave in a welfare-enhancing manner, and (2) purely history-dependent monetary … policy rules do not constitute an effective monetary instrument to keep welfare losses to a minimum. …

high levels of precautionary liquidity hoarding the optimal policy response of a Taylor rule is shown to indicate a zero … reserves can act as the main tool of monetary policy, that is shown to provide higher welfare gains in relation to a simple … Taylor rule. This result is shown to hold at the zero-bound and it is independent of the precautionary demand for liquidity …

conservative here when the long run Phillips curve is vertical than in the standard Calvo sticky price New Keynesian model …. Specifically, the Taylor principle is now necessary directly - no amount of output targeting can substitute for the monetary …

suggested in the previous literature. The welfare gains are more clearly seen in the reduced volatility of inflation than …