Applied researchers interested in estimating key parameters of DSGE models face an array of choices regarding numerical solution and estimation methods. We focus on the likelihood evaluation of models with occasionally binding constraints. We document how solution approximation errors and...

The paper provides the first quantitative analysis of how U.S. monetary policy responses should differ depending on the source of the observed oil price fluctuations. It presents three main sets of results. First, the paper proposes a novel decomposition of the marginal cost of production that...

One of the criticisms routinely advanced against models of the business cycle with staggered contracts is their inability to generate inflation persistence. This paper finds that staggered contracts µa la Taylor are, in fact, capable of reproducing the inflation persistence implied by U.S....

In a stylized DSGE model with an energy sector, the optimal policy response to an adverse energy supply shock implies a rise in core inflation, a larger rise in headline inflation, and a decline in wage inflation. The optimal policy is well approximated by policies that stabilize the output gap,...