This article investigates the reaction of the Federal Reserve to developments in the stock market. The issue is analysed by first constructing an Index of Stock Price Misalignment (ISPM) in which the fundamental value of the stocks is computed on the basis of the discounted cash flow approach...

We study the effects of progressive labor income taxation in an otherwise standard NK model. We show that progressive taxation (i) introduces a trade-off between output and inflation stabilization and affects the slope of the Phillips Curve; (ii) acts as automatic stabilizer changing the...