We introduce costly firm-entry a la Bilbiie et al. (2012) into a New Keynesian model with Epstein-Zin preferences and show that it can jointly account for a high mean value of bond and equity premium without compromising the fit of the model to first and second moments of key macroeconomic...

We examine the role of government spending in the dynamics of the term structure of interest rates. Is the quantity of risk related government spending important for the price of risk? How does it depend on monetary policy conduct? Can fiscal policy immunize its impact on the term structure of...

Distortionary income taxation in a standard New Keynesian model substantially increases the nominal term-premium on long-term bonds relative to a model with lumpsum taxes. Also the empirical level of the nominal term premium can be matched with lower risk-aversion coefficient in case of a model...

We develop a dynamic stochastic general equilibrium model calibrated to US data to examine how monetary policy shocks affect income inequality and the equity premium. The model features Ricardian and non-Ricardian households and shows that a monetary policy tightening causes an endogenous...

We estimate a New Keynesian model on post-war US data with generalised method of moments using either constant or time- varying debt and labor income taxes. We show that accounting for government debt and distortionary taxes help the New Keynesian model match the level of the nominal term...

We generalize a simple New Keynesian model and show that a flattening of the Phillips curve reduces the size of fiscal multipliers at the zero lower bound (ZLB) on the nominal interest rate. The factors behind the flatting are consistent with micro- and macroeconomic empirical evidence: it is a...