Full publication: "http://ssrn.com/abstract=2078895" Threat of Fiscal Dominance?We identify the economic environments in which it is most important for monetary policy to be able to track the natural rate of interest. To do this, we study two models: one is a standard New Keynesian model; in the...

The Balassa-Samuelson model, which explains real exchange rate movements in terms of sectoral productivities, rests on two components. First, for a class of technologies including Cobb-Douglas, the model implies that the relative price of nontraded goods in each country should reflect the...

We develop a model of monetary policy with a simple departure from the basic New Keynesian (NK) model. In this model, the central bank sets independently the interest rate on bank reserves and the nominal stock of bank reserves. Because reserves reduce the costs of banking, the model delivers...