We introduce endogenous growth in an otherwise standard NK model with staggered prices and wages. Some results follow: (i) monetary volatility negatively affects long-run growth; (ii) the relation between nominal volatility and growth depends on the persistence of the nominal shocks and on the...

Inflation in advanced economies is low by historical standards but there is no threat of deflation. Slower economic growth is caused by supply-side constraints rather than low inflation. Below-the-target inflation does not damage the reputation of central banks. Thus, central banks should not...

This article integrates monetary policy into a very simple dynamic supermultiplier model with an accommodating supply side. Results show that monetary policy guided by a conventional Taylor rule may stabilize an economy around the steady-state path of demand-led growth following temporary demand...

The paper analyses adverse investment, growth and distributional effects of ultra-loose monetary policies based on the monetary overinvestment theories of Hayek and Mises. We argue that ultra-loose monetary policies create incentives to substitute real investment by financial investment. When...

We analyze the implications of changes in the trend growth rate for optimal monetary policy in the presence of search and matching unemployment. We show that trend growth in itself does not generate a trade-off for the monetary authority, but that it interacts importantly with the inefficiencies...

Debates about the conduct of monetary policy have evolved over time from “rules versus discretion” to “policy rules versus constrained discretion.” We propose a metric to evaluate monetary policy rules that are consistent with constrained discretion by calculating quadratic loss ratios,...

Fiscal and monetary policy optimization has been the taskforce in many policymaking agendas ofinternational organizations, governments and alliances. However, attempts of the global community did not give the expected effect and rejected the anticipated targets. This article explores the main...

We evaluate the global macroeconomic effects of fiscal and monetary policy measures to counterbalance secular stagnation by simulating a five-region New Keynesian model of the world economy, calibrated to the United States (US), the euro area (EA), Japan (JP), China (CH), and the rest of the...

Economists and policy-makers have long sought the ideal framework for monetary policy as it is arguably one of the most important tools for government to influence the economy. Exchange rate and inflation are believed to be the most appealing anchors for providing guidance to the conduct of...

Recent monetary policy studies have shown that the trend productivity growth has non-trivial implications for monetary policy. This paper investigates how trend growth alters the effect of model uncertainty on macroeconomic fluctuations by introducing a robust control problem. We show that an...