Monetary Policy and Bubbles in a New Keynesian Model with Overlapping Generations

Jordi Galí

I analyze an extension of the New Keynesian model that features overlapping generations of finitely-lived agents and (stochastic) transitions to inactivity. In contrast with the standard model, the proposed framework allows for the existence of rational expectations equilibria with asset price bubbles. I study the conditions under which bubble-driven fluctuations may emerge and the type of monetary policy rules that may prevent them. I conclude by discussing some of the model's welfare implications

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Year of publication:	February 2020
Authors:	Galí, Jordi
Institutions:	National Bureau of Economic Research (contributor)
Publisher:	2020: Cambridge, Mass : National Bureau of Economic Research
Subject:	Geldpolitik \| Monetary policy \| Spekulationsblase \| Bubbles \| Neoklassische Synthese \| Neoclassical synthesis \| Overlapping Generations \| Overlapping generations \| Rationale Erwartung \| Rational expectations \| Kapitalmarkttheorie \| Financial economics

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