Policymakers often use the output gap, a noisy signal of economic activity, as a guide for setting monetary policy. Noise in the data argues for policy caution. At the same time, the zero bound on nominal interest rates constrains the central bank’s ability to stimulate the economy during downturns. In such an environment, greater policy stimulus may be needed to stabilize the economy. Thus, no...

the financial crisis of 2007 showed that the impact of financial markets on macroeconomic developments is deep. the labor market was affected by financial variables. this paper extends the new keynesian model of a stochastic dynamic general equilibrium (dsge) for the iran economy in three context of an open economy, consider a financial frictions and frictions labor market, the impact of financ...

These Working papers collect the work of the Faculty of Economics of the University of Insubria. The publication of work by other Authors can be proposed by a member of the Faculty, provided that the paper has been presented in public. The name of the proposer is reported in a footnote. The views expressed in the Working papers reflect the opinions of the Authors only, and not necessarily the o...

In this paper we formulate a baseline disequilibrium AS-AD model and empirically estimate it with time series data for the US-economy. The version of the model used here exhibits a Phillips-curve, a dynamic IS curve and a Taylor interest rate rule. It is based on sticky wages and prices, perfect foresight of current inflation rates and adaptive expectations concerning the inflation climate in w...

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 ex...

We seek to determine the optimal amount of the insurer’s investment in all types of assets for a small and closed economy. The goal is to detect the implications and contributions the risk seeker and risk aversion insurer commonly make and the effectiveness in the investment decision. Also, finding the optimum portfolio for each is the main goal of the present study. To this end, we adopted the...

We survey literature comparing in‡ation targeting (IT) and price-level targeting (PT) as macroeconomic stabilisation policies. Our focus is on New Keynesian models and areas that have seen signi…cant developments since Ambler’s (2009) survey: optimal monetary policy; the zero lower bound; …nancial frictions; and transition costs of adopting a PT regime. Ambler’s conclusion that PT improves soci...

The objective of this work is to present the structure and first simulation results of a post-keynesian macro-dynamic model for an industrialized and small open economy with floating exchange rates, imperfect mobility of capital, exports concentrated in primary goods, inflation target regime and two sectors. The model to be presented integrates both the real and financial aspects of post-keynes...