An alternative to New-Keynesian models for the study of optimal (monetary) policy∗
نویسنده
چکیده
The alternative, based on Cavalcanti-Wallace 1999, is one way to bridge the gap between two extreme models: an economy with no monitoring (and, therefore, no credit) and an economy with perfect monitoring (and, therefore, no role for money). Here, using an outside-money version of the model, optima for two examples, drawn from earlier work by Deviatov and Wallace, are described. Although the examples are simple, the optima are not simple and depend on all the details of the examples. The results should make users of New Keynesian models wonder why optima in their models are so different.
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