The simultaneous occurrence in the second half of the 1990s of low and falling price inflation and low unemployment appears to be at odds with the properties of a standard Phillips curve. We find this result in a model in which inflation depends on the unemployment rate, past inflation, and...

This paper describes the E-Newton and E-QNewton algorithms for solving rational expectations (RE) models. Both algorithms treat a model's RE terms as exogenous variables whose values are iteratively updated until they (hopefully) satisfy the RE requirement. In E-Newton, the updates are based on...

Participants in meetings of the Federal Open Market Committee (FOMC) regularly produce individual projections of real activity and inflation that are published in summary form. These summaries indicate participants' views about the most likely course for the macroeconomy but, by themselves, are...

The zero lower bound on nominal interest rates constrains the central bank's ability to stimulate the economy during downturns. We use the FRB/US model to quantify the effects of the bound on macroeconomic stabilization and to explore how policy can be designed to minimize these effects. During...

We exploit data on historical revisions to real-time estimates of the output gap to examine the implications of measurement error for the design of monetary policy, using the Federal Reserve's model of the U.S. economy, FRB/US. Measurement error brings about a substantial deterioration in...

We investigate the implications of rule-of-thumb behaviour on the part of consumers or price setters for optimal monetary policy and simple interest rate rules. The existence of such behaviour leads to endogenous persistence in output and inflation; changes the transmission of shocks to these...

Shifts in the long-run rate of productivity growth--such as those experienced by the U.S. economy in the 1970s and 1990s--are difficult, in real time, to distinguish from transitory fluctuations. In this paper, we analyze the evolution of forecasts of long-run productivity growth during the...

This paper examines welfare-maximizing monetary policy in an estimated micro-founded general equilibrium model of the U.S. economy where the policymaker faces uncertainty about model parameters. Uncertainty about parameters describing preferences and technology implies not only uncertainty about...

This paper reexamines wage and price dynamics in response to permanent shocks to productivity. We estimate a micro-founded dynamic general equilibrium (DGE) model of the U.S. economy with sticky wages and sticky prices using impulse responses to technology and monetary policy shocks. We utilize...