Using a dynamic stochastic general equilibrium (DSGE) model that accounts for credit constraints, we study the effects of fiscal stimulus on the macroeconomy. We show that the presence of credit constraints results in larger fiscal multipliers than indicated by the standard DSGE models. If...

We investigate optimal monetary policy design using a New Keynesian model that accommodates liquidity frictions. In this model, unlike the standard New Keynesian model, the central bank faces a trade-off between inflation and output stabilisation. Optimal policy requires a temporary deviation...

We estimate and compare two models, the Generalized Taylor Economy (GTE) and the Multiple Calvo model (MC) that have been built to model the distributions of contract lengths observed in the data. We compare the performances of these models to those of the standard models such as the Calvo and...

This paper develops a small-scale DSGE model which embeds a demographic structure within a monetary policy framework. We extend the tractable, though non-monetary overlapping-generations model of Gertler (1999) and present a small synthesis model which combines the set-up of Gertler with a...

Bils, Klenow and Malin (2009) recently constructed an empirical measure of reset price in.ation (i.e. the rate of change of all ‘desired’ prices) for the US economy, by using the micro-data underpinning the CPI and evaluated whether the existing pricing models can explain both the observed...

In this paper, we use the generalized Taylor economy (GTE) framework to examine the optimal choice of inflation index. In this otherwise standard dynamic stochastic general equilibrium (DSGE) model, there can be many sectors, each with a different contract length. In the GTE framework with an...

We develop the generalized Taylor economy (GTE) in which there are many sectors with overlapping contracts of different lengths. In economies with the same average contract length, monetary shocks will be more persistent when longer contracts are present. Using the Bils-Klenow distribution of...

In a recent paper, Michael Kiley argued that the Calvo model of price adjustment is both quantitatively and qualitatively different from the Taylor model. What we show is that Kiley (along with most other people) are choosing the wrong parameterization to compare the two models. In effect they...

In this paper we use the Generalized Taylor Economy (GTE) framework in which there are many sectors with overlapping contracts of different lengths to analyze the design of monetary policy. We derive a utility based objective function of a central bank for this economy and use it to evaluate the...

As climate change intensifies, the frequency and severity of climate-induced disasters are expected to escalate. We develop a New Keynesian Dynamic Stochastic General Equilibrium model to analyze the impact of these events on monetary policy. Our model conceptualizes these disasters as left-tail...