This paper characterizes the optimal long-run rate of inflation, consistent with an occasionally binding zero lower bound on nominal interest rates, in a stochastic New Keynesian sticky-price model calibrated to the U.S. economy. This may serve to inform discussions on the design of an...

Introducing learning into a standard asset pricing model improves considerably its empirical performance. In a model of learning where today's stock price is determined by the expectation of tomorrow's stock price, the dynamics of expectations and actual price are such that the market has...