This paper shows that plausible modifications to the Taylor rule for monetary policy can help explain several empirical anomalies to the behavior of inflation in the new-Keynesian general equilibrium model. The key anomalies considered are (1) the persistence of inflation, both in reduced form...

This paper shows that plausible modifications to the Taylor rule for monetary policy can help explain several empirical anomalies to the behavior of inflation in the new--Keynesian general equilibrium model. The key anomalies considered are (1) the persistence of inflation, both in reduced form...

The user cost elasticity is a parameter of considerable importance in economics, with implications for the effects of budget deficits, tax-based savings incentives, monetary policy, corporate taxes, and tariffs and quotas on capital goods. This paper analyzes the econometric issues that account...