Dynamic stochastic general equilibrium models featuring imperfect competition and nominal rigidities have become central for the analysis of the monetary transmission mechanism and for understanding the conduct of monetary policy. However, it is agreed that the benchmark model fails to generate...

Within a simple New Keynesian model emphasizing forward-looking behaviour of private agents, I evaluate optimal nominal income growth targeting versus optimal inflation targeting. When the economy under consideration is mainly subject to shocks that do not involve monetary policy trade-offs for...

How can a particular allocation and prices be implemented? Under what conditions does a policy deliver a unique competitive equilibrium? How many degrees of freedom there are in the determination of the policy variables, or how many are the instruments of policy? In this paper we analyze a...

Most of the literature estimating DSGE models for monetary policy analysis assume that policy follows a simple rule. In this paper we allow policy to be described by various forms of optimal policy - commitment, discretion and quasi-commitment. We find that, even after allowing for Markov...

This paper presents a two-country sticky-price model that allows for capital and investment spending. It analyzes the conditions for equilibrium determinacy under alternative interest-rate rules that react to either domestic or consumer price inflation. It is shown that in the presence of...

How does informality in emerging economies affect the conduct of monetary policy? To answer this question we construct a two-sector, formal-informal new Keynesian closed-economy. The informal sector is more labour intensive, is untaxed, has a classical labour market, faces high credit...

How does informality in emerging economies affect the conduct of monetary and fiscal policy? To answer this question we construct a two-sector, formal-informal new Keynesian closed-economy. The informal sector is more labour intensive, is untaxed, has a classical labour market, faces high credit...

We describe some of the main features of the recent vintage macroeconomic models used for monetary policy evaluation. We point to some of the key differences with respect to the earlier generation of macro models, and highlight the insights for policy that these new frameworks have to offer. Our...

Should central banks target producer price inflation or consumer price inflation in the setting of monetary policy? Previous studies suggest that in order to avoid real indeterminacy and self-fulfilling fluctuations, the interest rate rule for open economies should react to producer price...

We explore the costs and benefits of informality associated with the informal sector lying outside the tax regime in a two-sector New Keynesian model. The informal sector is more labour intensive, has a lower labour productivity, is untaxed and has a classical labour market. The formal sector...