Following a conjecture of Kozicki and Tinsley we generalises the habit formation model of consumption to allow for both a multiplicative utility function and a habit\aspiration function which is a geometrically weighted average of past consumption. The geometric form of the aspiration function...

Optimal nominal interest rate rules are usually set assuming that the underlying world is linear. In this paper we consider the performance of optimal rules when the underlying relationship between inflation and the output gap may be nonlinear. In particular if the inflation-output trade off...