.S. economy estimated in Rotemberg and Woodford (1997). Our main substantive finding is that low and stable inflation together … with stable interest rates can be achieved by letting the funds rate respond positively to inflation while also responding … expected utility to the representative household. Furthermore, when the funds rate responds to inflation only with a delay, due …

rational private sector expectations about housing prices and inflation, optimal monetary policy can be characterized by a … standard "target criterion" in terms of inflation and the output gap, that makes no reference to housing prices. If instead the … is projected to undershoot (overshoot) its normal targets for inflation and the output gap following unexpected housing …

even make possible complete stabilization of both aggregate output and inflation under certain circumstances, despite the …

that the private sector has rational expectations about future housing prices and inflation, optimal monetary policy can be … inflation and the output gap is optimal, as in the standard model without a housing sector. But when a policymaker seeks to … is projected to undershoot its normal targets for inflation and the output gap, and similarly aim to overshoot those …