This paper argues that limited asset market participation is crucial in explaining U.S. macroeconomic performance and monetary policy before the 1980s, and their changes thereafter. We develop an otherwise standard sticky-price dynamic stochastic general equilibrium model, which implies that at...

This paper argues that limited asset market participation is crucial in explaining U.S. macroeconomic performance and monetary policy before the 1980s, and their changes thereafter. In an otherwise conventional sticky-price model, standard aggregate demand logic is inverted at low enough asset...

This paper argues that limited asset market participation is crucial in explaining U.S. macroeconomic performance and monetary policy before the 1980s, and their changes thereafter. In an otherwise conventional sticky-price model, standard aggregate demand logic is inverted at low enough asset...

Intro -- Contents -- I. Introduction -- II. Limited Asset Market Participation and Monetary Policy: Some Theory -- III. Empirical Evidence -- IV. Change in Structure of Economy or in Distribution of Shocks? -- V. Conclusions -- General Model.

In a forward-looking business cycle model, central banks can achieve the (timeless)optimal commitment equilibrium even in the absence of a commitment technology, if they are delegated with an objective function that is different from the societal one. The paper develops a general...