This paper extends the New Keynesian model to allow for stochastic shifts in the monetary policy regime. Agents cannot observe the regime and use a Bayesian learning rule to make optimal inferences. Price setting is adapted to this environment: lagged expectations about monetary policy influence...

We study how human preferences affect the resilience of economies that depend on more than one type of natural resources. In particular, we analyze whether the degree of substitutability of natural resources in consumer needs may give rise to multiple steady states and path dependence even when...

We survey the literature on stock return forecasting, highlighting the challenges faced by forecasters as well as strategies for improving return forecasts. We focus on U.S. equity premium forecastability and illustrate key issues via an empirical application based on updated data. Some studies...

We assess the quantitative importance of expectation effects of regime shifts in monetary policy in a DSGE model that allows the monetary policy rule to switch between a "bad" regime and a "good" regime. When agents take into account such regime shifts in forming expectations, the expectation...