This paper offers a Bayesian decision-theoretic approach to policy evaluation in rational expectation models. First, we show how to correctly assess and rank simple policy rules under the welfare loss minimization criterion in the presence of uncertainty about the model’s structural...

The Chinese economy upheld a frail recovery in 2022 under the triple superposition of contraction of demand, disruption in supply, and weakening expectations, aggravated by unanticipated adverse shocks in the midst of global turmoil. Over the year, rising income uncertainty set off by the...

This paper examines the dynamics of Keynesian models that incorporate feedback effects from the labor market to income distribution, investment, aggregate demand and output. A baseline version of the model can generate endogenous growth cycles, but cumulative divergence and economic collapse...

We estimate a New-Keynesian macro model accommodating regime-switching behavior in monetary policy and in macro shocks. Key to our estimation strategy is the use of survey - based expectations for inflation and output. We identify accommodating monetary policy before 1980, with activist monetary...

This paper analyzes how monetary policy in an overlapping generations model can be designed to avoid inflationary consequences of anticipated changes of monetary policies. Avoiding these inflationary consequences will require a once and for all increase (decrease) in monetary growth immediately...

We formulate nominal wage adjustment by incorporating various concepts of fairness. By applying it into a continuous-time money-in-utility model we examine macroeconomic dynamics with and without a liquidity trap and obtain the condition for persistent unemployment, and that for temporary...

We estimate a New-Keynesian macro model accommodating regime-switching behavior in monetary policy and in macro shocks. Key to our estimation strategy is the use of survey-based expectations for inflation and output. Output and inflation shocks shift to the low volatility regime around 1985 and...

In the last decade, advanced economies, including the euro area, experienced deflationary pressures caused by the global financial crisis of 2007-2009 and the anti-crisis policies that followed—in particular, the new financial regulations (which led to a deep decline in the money multiplier)....

Against the backdrop of the move to an inflation targeting monetary policy framework beginning 2014 with consumer price index (CPI) inflation as the nominal anchor, this paper revisits monetary transmission dynamics. Rather than confining to the typical three equation New Keynesian model, this...

This article discusses the relationships between populism, economic policy design and central bank independence (CBI). Assuming that 1) a macro (banking) shock can occur, 2) the incumbent government can face a trade-off between bail-out and bail-in and can finance its public spending choosing...