We show that a .scal expansion by the core economies of the euro area would have a large and positive impact on periphery GDP assuming that policy rates remain low for a prolonged period. Under our preferred model speci.cation, an expansion of core government spending equal to one percent of...

Uncertainty is a challenge for monetary policy. This paper introduces model uncertainty into a behavioral New Keynesian DSGE framework to derive robust optimal monetary policies. We consider two potential forms of agents’ heterogeneity, which refer to two mechanisms of expectation formation...

There is much confusion in the economics literature on wage determination and the employment-inflation trade-off. Few model builders pay as much careful attention to the definition and meaning of long-run concepts as did Albert Ando. Expanding on years of painstaking work by Ando, the...