This paper compares staggered price setting to partial adjustment of prices in a small optimizing IS/LM model. In contrast to the overwhelming perception in the literature, the models are not similar for most parameterizations. These results clarify some confusion in recent work regarding the...

Inflation expectations play a central role in models of the Phillips curve. At long time horizons inflation expectations may reflect the credibility of a monetary authority's commitment to price stability. These observations highlight the importance of inflation expectations for monetary policy....

In the years following 2009, long-term unemployment has been very elevated while inflation has fallen only moderately, raising the question of whether the long-term unemployed exert less downward pressure on prices than the short-term unemployed, perhaps because such potential workers are...

The most common New-Keynesian model--with sticky-prices--has potentially implausible implications in a zero-lower bound environment. Fiscal and forward guidance multipliers can be implausibly large. Moreover, the sticky-price model implies that positive supply shocks, such as an increase in...

Monetary policy actions since 2008 have influenced long-term interest rates through forward guidance and quantitative easing. We propose a strategy to identify the comovement between interest rate and equity price movements induced by monetary policy when an observable representing policy...

I develop empirical models of the U.S. economy that distinguish between the aggregate demand effects of short- and long-term interest rates-one with clear "microfoundations" and one more loosely motivated. These models are estimated using government and private long-term bond yields. Estimation...

While uncovered interest parity (UIP) fails unconditionally, UIP conditional on monetary policy actions remains a cornerstone of macroeconomic models used for monetary policy analysis. We posit that monetary policy actions are partially revealed by FOMC statements and propose a new...

Monetary policy actions since 2008 have influenced long-term interest rates through forward guidance and quantitative easing - both "unconventional" strategies. We examine whether the effect of such actions on Treasury yields have passed through to private yields to a degree comparable to...

Historical experience suggests an important role for some deviation from the most restricted form of rational expectations in inflation dynamics, but also shows that other aspects of sluggish price adjustment – such as nominal rigidities, are important; and the available indicators of...

This paper analyzes fluctuations in residential investment using an estimated DSGE model of the U.S. economy, which is current used to analyze policy questions and to produce forecasts on a regular basis. Importantly, the model is more detailed in its treatment of domestic spending and...