This paper analyzes the restrictions necessary to ensure that the policy rule used by the central bank does not introduce real indeterminacy into the economy. It conducts this analysis in a flexible price economy and a sticky price model. A robust conclusion is that to ensure determinacy, the...

A study of the effects of expectations and central bank credibility on the economy's dynamic transition path during a disinflation. Using a version of the Fuhrer-Moore model, it compares simulations under different specifications that vary according to the way expectations are formed and the...

An examination of the dynamics of commitment, showing that because the decision regarding rules versus discretion occurs in real time, opting for discretion is often the better choice, since it leaves open the possibility of adopting rules later on.

Search-theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential. However, tractable versions usually have strong assumptions that make them ill suited for discussing some policy questions, especially those concerning changes in the money...

This paper addresses the problem of multiple equilibria in a model of time-consistent monetary policy. The author suggests that the problem originates in the assumption that agents have rational expectations and proposes several alternative restrictions on expectations that allow the monetary...

This paper investigates the welfare effects of inflation in economies with search frictions and menu costs. We first analyze an economy where there is no transaction demand for money balances: Money is a mere unit of account. We determine a condition under which price stability is optimal and a...

Revised. This paper investigates the role of beliefs over monetary policy in propagating the effects of monetary policy shocks within the context of a dynamic, stochastic general equilibrium model. In this model, monetary policy periodically switches between low- and high-money-growth regimes....

Should monetary policy respond to asset prices? This paper analyzes this question from the vantage point of equilibrium determinacy.

Recessions are associated with both rising oil prices and increases in the federal funds rate. Are recessions caused by the spikes in oil prices or by the sharp tightening of monetary policy? This paper discusses the difficulties in disentangling these two effects.