This paper estimates a DSGE model with learning to reexamine the evidence on time variation in post-war U.S. monetary policy. Several papers document a regime switch, by showing that policy changed from 'passive' and destabilizing in the pre-1979 period to 'active' and stabilizing in the...

In this article, we study the optimal simple monetary policy rules under the Zero Lower Bound using DSGE model. The model economy is open and highly dependent on the terms of trade. Economic dynamics is the result of a terms of trade shock and an external interest rate shock. Using the impulse...

In a simple New Keynesian model, we derive a closed form solution for the inflation-gap persistence parameter as a function of the policy weights in the central bank’s Taylor rule. By estimating the time-varying weights that the FED attaches to inflation and the output gap, we show that the...

In a simple New Keynesian model, we derive a closed form solution for the inflation persistence parameter as a function of the policy weights in the central bank’s Taylor rule. By estimating the time-varying weights that the FED attaches to inflation and the output gap, we show that the...

In the recent New Keynesian literature a standard assumption is that the price for which an intermediate good is sold to the final good firm is equal to the marginal costs of the intermediate good firm. However, there is empirical evidence that this need not to hold. This paper introduces price...

I characterize optimal monetary and fiscal policy in a stochastic New Keynesian model when nominal interest rates may occasionally hit the zero lower bound. The benevolent policymaker controls the short-term nominal interest rate and the level of government spending. Under discretionary policy,...

Advanced economies are undergoing a structural transformation from manufacturing to services. We document that structural change comes with a process of services deepening: over time, both services and manufacturing become more intensive in service inputs. We argue that structural transformation...