This article complements the structural New-Keynesian macro framework with a no-arbitrage affine term structure model. Whereas our methodology is general, we focus on an extended macro-model with an unobservable time varying inflation target and the natural rate of output which are filtered from...

This paper shows that the concept of Expectational stability (E-stability) in a multivariate framework is inherently model-dependent. Whereas a Rational Expectations equilibrium (REE) is subject to model-specific parameter restrictions from the economic model at hand, a perceived law of motion...

This paper proposes forward convergence as a model refinement scheme for linear rational expectations (LRE) models and an associated no-bubble condition as a solution selection criterion. We relate these two concepts to determinacy and characterize the complete set of economically relevant...

This paper generalizes the standard forward method of recursive substitution to a general class of linear rational expectations models with potentially multiple fundamental solutions. It is shown that the existence and uniqueness of the well-known forward solution are preserved in a general...

We estimate a New-Keynesian macro model accommodating regime-switching behavior in monetary policy and in macro shocks. Key to our estimation strategy is the use of survey-based expectations for inflation and output. We identify accommodating monetary policy before 1980, with activist monetary...

Ellison and Pearlman (2011) show that determinacy implies e-stability under both full and lagged information if (1) subjective expectations are consistent with a structural model and unbiased, and (2) a learning process is given by the saddlepath relationship. This study clarifies that their...

We estimate a New-Keynesian macro model accommodating regime-switching behavior in monetary policy and in macro shocks. Key to our estimation strategy is the use of survey-based expectations for inflation and output. We identify accommodating monetary policy before 1980, with activist monetary...

This paper presents a small-sample study of the threeequation- three variable New-Keynesian macro model. While the point estimates imply that the Fed has been stabilizing inflation fluctuations since 1980, our econometric analysis suggests considerable uncertainty regarding the stance of the Fed...

Online appendix for the Review of Economic Dynamics article

This paper derives a recursive method and the corresponding forward solution for linear Rational Expectations (RE) models in the class of fundamental solutions. Our recursive method is a generalization of the traditional forward method of recursive substitution when predetermined variables are...