We study the welfare cost of inflation in a general equilibrium life cycle model with growth, costly financial intermediation, and taxes on nominal quantities. We find a stationary equilibrium of the model matches a wide variety of facts about the postwar U.S. economy. We then calculate that the...

We study a simple, microfounded macroeconomic system in which the monetary authority employs a Taylor-type policy rule. We analyze situations in which the self-confirming equilibrium is unique and learnable according to Bullard and Mitra (2002). We explore the prospects for the use of ‘large...

This survey paper discusses the policy implications that can be expected from the recent research on nonlinearity and chaos in economic models. Expected policy implications are interpreted as a driving force behind the recent proliferation of research in this area. In general, it appears that no...

We study a model of economic growth and development with a threshold externality. The model has one steady state with a low and stagnant level of income per capita and another steady state with a high and growing level of income per capita. Both of these steady states are locally stable under...

A puzzle in consumption theory is the observation of a hump in age-consumption profiles. We study a general equilibrium life-cycle economy with capital in which households include both consumption and leisure in their period utility function. We calibrate the model and find that a significant...

Genetic algorithms have been used by economists to model the process by which a population of heterogeneous agents learn how to optimize a given objective. However, most general equilibrium models in use today presume that agents already know how to optimize. If agents face any uncertainty, it...

We document that monetary policy inertia can help alleviate problems of indeterminacy and non-existence of stationary equilibrium observed for some commonly-studied monetary policy rules. We also find that inertia promotes learnability of equilibrium. The context is a simple, forward-looking...

We study adaptive learning behavior in a sequence of n-period endowment overlapping generations economies with fiat currency, where n refers to the number of periods in agents' lifetimes. Agents initially have heterogeneous beliefs and seek to form multi-step-ahead forecasts of future prices...

We study macroeconomic systems with forward-looking private sector agents and a monetary authority that is trying to control the economy through the use of a linear policy feedback rule. A typical finding in the burgeoning literature in this area is that policymakers should be relatively...

A structural vector autoregression is employed to estimate the real output level response to permanent inflation shocks. We identify the model by assuming that in the long run, inflation is a monetary phenomenon. Well-known economic theory is used to establish this identification restriction....