Previous literature shows that in the presence of staggered price setting, high trend inflation induces not only a large loss in steady-state output relative to its natural rate but also indeterminacy of equilibrium under the Taylor rule. This paper examines the implications of a "smoothed-off"...

In the presence of staggered price setting, high trend inflation induces a large deviation of steady-state output from its natural rate and indeterminacy of equilibrium under the Taylor rule. This paper examines the implications of a ''smoothed-off'' kink in demand curves for the natural rate...

The present paper explores the implications for monetary policy of different labor market structures. In one labor market workers are identical and thus easily interchangeable between firms, while in another labor market workers are specialized to fill the needs of specific firms. The labor...

At the turn of the 21st century, labor force participation in the United States reversed its decades-long increase and started trending lower. In the four years since the start of the recent recession, the labor force participation rate experienced a far bigger drop than in any previous...

Bivariate SVAR models employing long-run identifying restrictions are popular tools to investigate the source of business cycle fluctuations. Their advantage is the simplicity in use and interpretation. However, their low dimension may also lead to a failure of the identification procedure, with...

We study discretionary equilibrium in the Calvo pricing model for a monetary authority that chooses the money supply. The steady-state inflation rate is above 8 percent for a baseline calibration, but it varies substantially with alternative structural parameter values. If the initial condition...

In a sticky-price model with labor market search and matching frictions, forecast-based interestrate policy almost always induces indeterminacy when it is strictly inflation targeting and satisfies the Taylor principle. Indeterminacy is due to a vacancy channel of monetary policy that makes...

Despite record-low interest rates, the pace of the current economic recovery has been only moderate. One reason is that the positive impact of lowered interest rates on consumer purchases of durable goods has diminished