This paper reviews the recent literature on monetary policy rules. We exploit the monetary policy design problem within a simple baseline theoretical framework. We then consider the implications of adding various real world complications. Among other things, we show that the optimal policy...

This paper estimates the importance of the cost channel of monetary policy in a New Keynesian model of the business cycle. A model with nominal rigidities is extended by assuming that a fraction of firms need to borrow money to pay their wage bill. Hence, monetary policy tightenings increase...

Our answer: not so well. We reach that conclusion after reviewing recent research on the role of technology as a source of economic fluctuations. The bulk of the evidence suggests a limited role for aggregate technology shocks, pointing instead to demand factors as the main force behind the...

Intro -- Contents -- I. INTRODUCTION -- II. ESTIMATING THE EFFECTS OF TECHNOLOGY SHOCKS -- III. POSSIBLE PITFALLS IN THE ESTIMATION OF THE EFFECTS OF TECHNOLOGY SHOCKS -- IV. EXPLAINING THE EFFECTS OF TECHNOLOGY SHOCKS -- V. TECHNOLOGY SHOCKS AND THE BUSINESS CYCLE IN AN ESTIMATED DSGE MODEL --...

Our answer: Not so well. We reached that conclusion after reviewing recent research on the role of technology as a source of economic fluctuations. The bulk of the evidence suggests a limited role for aggregate technology shocks, pointing instead to demand factors as the main force behind the...