Inflation expectations have been of great interest to economists because they predict how agents in an economy set prices and react to changes in various macroeconomic variables. The existence of Keynesian liquidity traps in Japan and the United States have helped emphasize the importance of...

This paper studies the steady state and dynamic consequences of inflation in an estimated dynamic stochastic general equilibrium model of the U.S. economy. It is found that 10 percentage points of inflation entails a steady state welfare cost as high as 13 percent of annual consumption. This...

Most central banks perceive a trade-off between stabilizing inflation and stabilizing the gap between output and desired output. However, the standard new Keynesian framework implies no such trade-off. In that framework, stabilizing inflation is equivalent to stabilizing the welfare-relevant...

We study the interaction of multiple large economies in dynamic stochastic general equilibrium. Each economy has a monetary policymaker that attempts to control the economy through the use of a linear nominal interest rate feedback rule. We show how the determinacy of worldwide equilibrium...

This article discusses a more general interpretation of the two-step minimum distance estimation procedure proposed in earlier work by Sbordone. The estimator is again applied to a version of the New Keynesian Phillips curve, in which inflation dynamics are driven by the expected evolution of...

The foundation of the New Keynesian Phillips curve (NKPC) is a model of price setting with nominal rigidities that implies that the dynamics of inflation are well explained by the evolution of real marginal costs. In this paper, we analyze whether this is a structurally invariant relationship....

It has been argued that existing DSGE models cannot properly account for the evolution of key macroeconomic variables during and following the recent Great Recession, and that models in which inflation depends on economic slack cannot explain the recent muted behavior of inflation, given the...

This paper examines the different effects of macroprudential policy and monetary policy on credit and inflation using a simple New Keynesian model with credit. In this model, macroprudential policy is effective in stabilizing credit but has a limited effect on inflation. Monetary policy with an...

Many central banks have come to rely on dynamic stochastic general equilibrium, or DSGE, models to inform their economic outlook and to help formulate their policy strategies. But while their use is familiar to policymakers and academics, these models are typically not well known outside these...