This paper analyzes the effects of lower bound for interest rates on distributions inflation and rates. In a New Keynesian model with bound, two equilibria emerge: policy is mostly unconstrained in “target equilibrium,” whereas constrained “liquidity trap equilibrium.” Using options data inflation, we find forecast densities consistent target equilibrium no evidence favor liquidity equilibrium....

Differential tax analysis is used to show how the socially optimal fiscal-tax to liquidity-tax ratio changes with the relative size of the tax-evading hidden economy. The smaller the relative size of the hidden economy, the larger the optimal fiscal-tax to liquidity-tax ratio. The empirical cross-section and panel evidence supports this theoretical result. JEL: E31, E52, H21, O17

This paper develops a tractable dynamic term structure models under jump-diffusion and regime shifts with time varying transition probabilities. The model allows for regime-dependent jumps while both jump risk and regime-switching risk are priced. Closed form solution for the term structure is obtained for an affine-type model under loglinear approximation. JEL Classification: G12, E43, E52

In this paper we propose straightforward extensions of multi-union, monopolistic competition models appearing in the recent literature on the macroeconomic effects of monetary policy. We extend these models from the Stackelberg equilibrium to the Nash equilibrium under variations in labor market regime in order to evaluate propositions about non-neutrality of monetary policy. JEL Classification...

We compare the findings of central bank researchers and academic economists regarding macroeconomic effects quantitative easing (QE). find that papers QE to be more effective than do. Central report larger on output inflation. They also are significant, both statistically economically, they use positive language in abstract. who experience favorable career outcomes. A survey banks reveals subst...

Can central banks defuse rising stability risks in financial booms by leaning against the wind with higher interest rates? This paper studies state-dependent effects of monetary policy on crisis risk. Based near-universe advanced economy cycles since nineteenth century, we show that discretionary policies during credit and asset price are more likely to trigger crises than prevent them. (JEL E4...

I analyze an extension of the New Keynesian model that features overlapping generations finitely lived agents and (stochastic) transitions to inactivity. In contrast with standard model, proposed framework allows for existence rational expectations equilibria asset price bubbles. study conditions under which bubble-driven fluctuations may emerge type monetary policy rules prevent them. conclude...

After the Great Recession several central banks started setting negative nominal interest rates in an expansionary attempt, but effectiveness of this measure remains unclear. Negative can stimulate economy by lowering that commercial charge on loans, they also erode bank profitability squeezing deposit spreads. This paper studies effects a new DSGE model where intermediate transmission monetary...

We propose a model of banks’ exposure to movements in interest rates and their role the transmission monetary shocks. Since bank deposits provide liquidity, higher allow banks earn larger spreads on deposits. Therefore, if risk aversion is than one, optimal dynamic hedging strategy take losses when rise. This can be achieved by traditional maturity-mismatched balance sheet amplifies effects sho...

This paper outlines the evolution of the theory of economic policy from the classical contributions of Frisch, Hansen, Tinbergen and Theil to situations of strategic interaction. Andrew Hughes Hallett has taken an active and relevant part in this evolution, having contributed to both the development and recent rediscovery of the classical theory, with possible relevant applications for model bu...