Literature on monetary policy can be broadly classified into two categories. The first category involves the construction of dynamic stochastic general-equilibrium models for monetary policy. The solid micro foundations built into these models are important because they facilitate interpretation...

We formulate a generalized price-setting framework that incorporates staggered contracts of multiple durations and that enables us to directly identify the influences of nominal vs. real rigidities. Using German macroeconomic data over the period 1975Q1 through 1998Q4 to estimate this framework,...

We compute the optimal Ramsey policy in a New Keynesian model where the steady state suffers from monopolistic and tax distortions. We show that the optimal monetary policy in this environment displays asymmetric responses to shocks to optimally inflate the economy (slightly) at times when it...

This paper addresses three issues on the conduct of monetary policy in open economies on the basis of a two-country model with Calvo-type sticky prices. Is the isomorphism of the optimal policy problems between closed and open economies robust to whether the foreign country is buffeted by...