Kurz, Mordecai; Jin, Hehui; Motolese, Maurizio - Center for Financial Studies - 2003
monetary policy. Since expectations affect demand, our theory shows economic fluctuations are mostly driven by varying demand … without discretion, monetary policy has a strong stabilization effect and an aggressive anti-inflationary policy can reduce … inflation hence the aggregate price level appears sticky with respect to money shocks. (v) Discretion in monetary policy adds a …