The Taylor Principle is often used to explain macroeconomic stability (see, e.g., Clarida et al. 2000). The reason is that this simple principle guarantees determinacy, i.e., local uniqueness of rational expectations equilibrium, in many New Keynesian models. However, analyses of determinacy are...

We study the aggregate implications of sectoral shocks in a multi-sector New Keynesian model featuring sectoral heterogeneity in price stickiness, sector size, and input-output linkages. We calibrate a 341 sector version of the model to the United States. Both theoretically and empirically,...

We study the aggregate implications of sectoral shocks in a multi-sector New Keynesian model featuring sectoral heterogeneity in price stickiness, sector size, and input-output linkages. We calibrate a 341 sector version of the model to the United States. Both theoretically and empirically,...

We study discretionary equilibrium in the Calvo pricing model for a monetary authority that chooses the money supply, producing three main contributions. First, price‐adjusting firms have a unique equilibrium price for a broad range of parameterizations, in contrast to earlier results for the...

I show that when prices are sticky the Q theory of firms' behavior predicts that market-book ratios increase as inflation expectations diminish, holding investment fixed. In the data stock prices and investment correlate poorly precisely when stock prices and inflation move in opposite...

In this paper, I embed the fiscal theory of the price level (FTPL) in a simple continuous-time New Keynesian (NK) model with capital and capital adjustment costs. I offer an elaborate analysis of determinacy, model dynamics, transmission channels and the importance of capital adjustment costs in...

We study optimal policy design in a monetary model with heterogeneous preferences. In the model, financial markets are incomplete and households are heterogeneous with respect to their current consumption preferences and discount factors. The government controls the supply of money (liquid) and...

We study optimal policy design in a monetary model with heterogeneous preferences. In the model markets are incomplete and households are heterogeneous with respect to their current consumption preferences and discount factors. The government controls the supply of money (liquid) and nominal...

This paper derives explicitly an equity pricing relationship in a New Keynesian model. This relationship is used to study the equity pricing implications of New Keynesian models. I find that New Keynesian models suffer from the same asset pricing shortcomings as more traditional RBC versions....

The uniqueness of bounded local equilibria under interest rate rules is analyzed in a model with sticky information `a la Mankiw and Reis (2002). The main results are tighter bounds on monetary policy than in sticky-price models, irrelevance of the degree of output-gap targeting for determinacy,...