This paper shows that deviations from long-run price stability are optimal in the presence of price stickiness whenever profit and utility flows are discounted at a different rate. In that case, a monetary authority acting under commitment will choose a path for the inflation rate that ends with...

Monetary policy strategies that target the price level have been advocated as a more effective way to provide economic stimulus in a deep recession when conventional monetary policy is limited by the zero lower bound on nominal interest rates. Yet, the effectiveness of these strategies depends...

"Building on the recent macro finance literature, this paper develops an empirical term structure model in which investors' judgmental forecasts of macro variables play an important role. The model allows for a limited form of time-variation in the dynamics describing the behavior of short-term...