This paper investigates the quantitative importance of various types of frictions for inflation and nominal interest rate dynamics by extending business cycle accounting to monetary models. Representing a variety of real and nominal frictions as `wedges' to standard equilibrium conditions allows...

In a New Keynesian model with asymmetric information we show that publication of macroeconomic projections and of the future interest rate path by the central bank can improve macroeconomic outcomes. However, the gains from publishing interest rate paths are small relative to those from...

This paper extends the benchmark Macro-Finance model by introducing, next to the standard macroeconomic factors, additional liquidity-related and return forecasting factors. Liquidity factors are obtained from a decomposition of the TED spread while the return forecasting (risk premium) factor...

Interest rates have been unusually low in this decade. Some prominent analysts have suggested that this is due to a saving glut, especially in China. A more likely source of the lower real interest rate level is a fall in the demand for capital goods and its financing. This article looks at...

In this research note I propose the use of the undetermined coefficients method as an alternative approach to solve the Central Bank optimization problem in a neo-keynesian economy. The advantage of using this method is that it provides a theory as to how rational expectations are constructed,...

In this paper we have taken issue with those Marxian and post-Keynesian views which neglect the broad similarities between Marx’s economics and post-Keynesian approaches in the field of money, credit and the rate of interest. Starting from the older observations on the common ground of...

This paper extends the benchmark Macro-Finance model by introducing, next to the standard macroeconomic factors, additional liquidity-related and return forecasting factors. Liquidity factors are obtained from a decomposition of the TED spread while the return forecasting (risk premium) factor...

This paper extends the benchmark Macro-Finance model by introducing, next to the standard macroeconomic factors, additional liquidity-related and return forecasting factors. Liquidity factors are obtained from a decomposition of the TED spread while the return-forecasting (risk premium) factor...

Over the past twenty years, the federal funds rate has evolved from being an intermediate target or indicator variable in discussions of monetary policy to the Federal Reserve’s (exogenous) policy instrument. How the funds rate is characterized has important implications for modeling,...

In this paper we analyze the performance of an equilibrium model of the term structure of the interest rate under Epstein-Zin/Weil preferences in which consumption growth and inflation follow a VAR process with logistic stochastic volatility. We find that the model can successfully reproduce the...