In this paper we assess whether forward guidance for monetary policy regarding the future path of interest rates is desirable. We distinguish between two cases where forward guidance for monetary policy may be helpful. First, forward guidance may reveal private information of the central bank....

We analyze a simple yet fully non-linear New Keynesian model of the liquidity trap. Productivity shocks are the only source of aggregate fluctuations and the central bank acts as a discretionary policy maker that pursues an inflation targeting strategy. We use this model to assess the effects of...

We integrate banks and the coexistence of bank and bond financing into an otherwise standard New Keynesian framework. There are two policy-makers: a central banker, who can decide on short-term nominal interest rates, and a macroprudential policy-maker, who can vary aggregate capital...

This paper extends the concept of discretionary equilibrium for linear-quadratic models with rational expectations by allowing for linear non-Markovian strategies of the policy-maker and the other agents in the economy. Applying this concept to the standard New Keynesian framework, we show that...

We integrate banks and the coexistence of bank and bond financing into an otherwise standard New Keynesian framework. There are two policy-makers: a central banker, who can decide on short-term nominal interest rates, and a macroprudential policy-maker, who can vary aggregate capital...