New solutions to the basic standard New Keynesian model are explored. I extend De Grauwe’s model (2012), distinguishing two types of agents and different expectations rules. The central bank fixes the rate of interest. Families and firms determine aggregated demand and supply. Neither of them...

This paper proposes the evaluation of the New Keynesian Phillips Curve (NKPC) under a new learning mechanism where VAR learning dynamics is combined with the idea of testing the validity of the forward-looking model of inflation dynamics. The key assumption is that agents’ perceived law of...

This study sheds new light on the question of whether or not sentiment surveys, and the expectations derived from them, are relevant to forecasting economic growth and stock returns, and whether they contain information that is orthogonal to macroeconomic and financial data. I examine 16...

In this paper, I numerically simulate the path of economy in an economic depression. It is not easy to perform a numerical simulation of the path to a steady state if households are assumed to behave by generating rational expectations. It is much easier, however, if households are assumed to...

The current debate on financial inclusion pays little attention to whether financial inclusion is pro-cyclical with the fluctuating business cycle. This article investigates the relationship between financial inclusion and the business cycle. The findings reveal that the level of savings and the...

The argument made in this manuscript is that the two traditional macroeconomic tools, fiscal policy and monetary policy, are insufficient to bring back efficiently into equilibrium an economy that has had a major crisis. Both traditional macro-tools only work through the demand side, and there...

Most traditional explanations for the decreasing aggregate output volatility - so-called "Great Moderation" - fail to accommodate, or even directly contradict, another aspect of empirical data: the average sales volatility for publicly-traded US firms has been increasing during the same period....

This study derives a reduced-form equation for the aggregate supply curve from a model in which firms pay efficiency wages and workers have imperfect information about average wages at other firms. If specific assumptions are made about workers’ expectations of average wages and about...

In this paper we present evidence on the association between unemployment and output in the G7 economies, which has direct implications for the validity of Okun's Law. Specifically, we investigate dependence and asymmetry between the residuals of the output and unemployment first difference...

I document cyclical properties of aggregate measures of liabilities, equity, and leverage ratio in the U.S. financial sector and those of credit spread. I find that (i) liabilities and equity are procyclical, leverage ratio is acyclical, and credit spread is countercyclical, (ii) financial...