This Paper reviews the distinction between the timeless perspective and discretionary modes of monetary policymaking, the former representing rule-based policy as recently formalized by Woodford (1999b). In models with forward-looking expectations there is typically a second inefficiency from...

The ‘new open-economy macroeconomics’ seeks to provide an improved basis for monetary and exchange-rate policy through the construction of open-economy models that feature rational expectations, optimizing agents, and slowly adjusting prices of goods. This Paper promotes an alternative...

For issues regarding business cycles, the Phillips curve or aggregate supply portion of a macroeconomic model's specification is crucial. Unfortunately, the relevant dynamic behavior is poorly understood: flexible-price models appear inconsistent with the data, while existing sticky-price models...