We embed an extension of the canonical epidemiology model in a New Keynesian model with uninsurable income risk. In our framework, two factors contribute to making consumption less sensitive to real interest rate changes in a pandemic. First, individuals are less willing to take advantage of...

In this chapter, we propose a two-country, two-sector, New Keynesian model with essential and non-essential goods for the Euro Area to assess the macroeconomic consequences of a labor supply shock. Our model incorporates health status in the households’ maximization problem which depends on...

The lack of inflation in 2020 despite the fastest money growth rates since World War II at first seems puzzling for anyone believing that money still matters. The monetary expansion merely offset the effects of declining velocity of money and reduced spending associated with the lockdowns,...