We scrutinize the monetary transmission mechanism in New-Keynesian models, focusing on the role of capital, the key ingredient in the transition from the basic framework to DSGE models. The widely held view that monetary policy affects output and inflation in these models through a real interest...

"The generation and implementation of ideas, or knowledge, is crucial for economic performance. We study this process in a model of endogenous growth with frictions. Productivity increases with knowledge, which advances via innovation, and with the exchange of ideas from those who generate them...