In a recent paper, Mertens and Ravn (2010) study the effects of anticipated fiscal policy shocks in a structural vector autoregressive model. The authors maintain that (i) the lag polynomial associated with news shocks is a cyclotomic polynomial and (ii) the matrix B(L) which transforms a...

This paper integrates a money and credit market into a static approximation of the baseline New Keynesian model based on a money-and-credit-in-the-utility approach, in which real balances and borrowing contribute to the household's utility. In this framework, the central bank has no direct...

This paper studies the volatility implications of anticipated cost-push shocks (i.e. news shocks) in a New Keynesian model under optimal unrestricted monetary policy with forward-looking rational expectations (RE) and backward-looking boundedly rational expectations (BRE). If the degree of...

Abstract This paper uses a dynamic framework of a small open economy to study the volatility effects of partially anticipated monetary policy shocks in which the public has imperfect information about the size and/or the timing of the future expansionary policy intervention. Our two main results...

In a recent paper, Mertens and Ravn (2010) study the effects of anticipated fiscal policy shocks in a structural vector autoregressive model. The authors maintain that (i) the lag polynomial associated with news shocks is a cyclotomic polynomial and (ii) the matrix B(L) which transforms a...

This paper integrates a money and credit market into a static approximation of the baseline New Keynesian model based on a money-and-credit-in-the-utility approach, in which real balances and borrowing contribute to the household's utility. In this framework, the central bank has no direct...

Rational expectations models with news shocks may generate moving average representation that are nonfundamental. The nonfundamentalness typically arises from the lag polynomial associated with news shocks. This paper provides an exact solution formula for this special type of polynomial and...

Abstract This paper integrates a money and credit market into a static approximation of the baseline New Keynesian model based on a money-and-credit-in-the-utility approach, in which real balances and borrowing contribute to the household’s utility. In this framework, the central bank has no...