A sticky-price, sticky-wage dynamic general equilibrium model of the euro area, with habit formation, investment adjustment costs and variable capacity utilisation, is estimated by Bayesian methods on …
Online FirstJournal of Money, Credit and BankingOnline 11 Sep 2026
The Behavioral New Keynesian model fixes the forward guidance puzzle by making agents myopic: "cognitive discounting", in Gabaix's (2014, 2016, 2020) formulation, shrinks expectations of distant …
PublishedEconometricaOnline 1 Jan 2024Published Sep 2024
The paper asks whether a government can run a deficit today — issuing "stimulus checks" — and allow debt to return to its initial level without any future tax hike or spending cut. In environments …
By building three nested HANK economies and then constructing a deliberately simple two-agent counterpart for each, this paper argues that what household heterogeneity does to aggregate output can be …
Adding habit formation in consumption to an optimising sticky-price model changes both the IS curve and the Phillips curve, makes the variance of output itself -- not only the output gap -- …
A New Keynesian model is extended with hiring costs that rise in labour market tightness and with real wage rigidity, so that unemployment exists and moves. Under the paper's utility specification the …
PublishedClassicJournal of the European Economic AssociationOnline 12 Jun 2020Published Apr 2021
A HANK model that is tractable enough to solve on paper, built by grafting Diamond-Mortensen-Pissarides search frictions onto a New Keynesian economy and then imposing assumptions that make the wealth …
Online FirstThe Economic JournalOnline 26 Jun 2026
The cashless-limiting result in Woodford (1998) — that as money velocity diverges the allocation of a monetary economy converges to that of the corresponding economy without money — is the theoretical …
This paper asks how much of the HANK literature's message about aggregate behaviour survives in a far simpler model, and answers by first identifying exactly what heterogeneity does.
In an optimizing-agent model where both wages and prices are set in staggered Calvo contracts, monetary policy cannot reach the allocation that would prevail under fully flexible wages and prices, …
PublishedClassicJournal of Money, Credit and BankingPublished Jan 2007
The standard New Keynesian model implies that stabilising inflation also stabilises the welfare-relevant output gap -- a property the authors name the "divine coincidence" and trace to the absence of …
Letting a fraction of consumers and price setters replace optimisation with a backward-looking rule of thumb adds endogenous persistence to output and inflation, changes how shocks travel through a …
A New Neoclassical Synthesis model of the US economy with seven structural shocks and a full set of real and nominal frictions is estimated on seven quarterly series by Bayesian methods, and shown to …
PublishedClassicQuantitative EconomicsOnline 1 Nov 2020Published Nov 2020
A solution method for discrete-time heterogeneous-agent models with aggregate risk that extends Reiter's perturbation approach by compressing the state space after the no-aggregate-risk stationary …
This 1983 Journal of Monetary Economics paper by Guillermo Calvo builds a model of staggered price-setting that is more analytically tractable than the earlier discrete-contract-length models of …
Staggered price-setting was long hoped to turn a short spell of exogenous price stickiness into a long spell of endogenous stickiness, and so into persistent output movements after a monetary shock. …
PublishedClassicJournal of International EconomicsPublished Aug 2001
An interim survey of the dynamic general equilibrium open-economy literature that grew out of Obstfeld and Rogoff's 1995 Redux model, organised around the question of which of its assumptions its …