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Author:Schmitt-Grohe, Stephanie 

Journal Article
Commentary on Inflation targeting and optimal monetary policy

Review , Volume 86 , Issue Jul , Pages 43-50

Journal Article
Policy implications of the New Keynesian Phillips curve

This article surveys recent advancements in the theory of optimal monetary policy in models with a New Keynesian Phillips curve. It identifies four policy implications. First, near price stability is optimal. Second, simple interest rate feedback rules that respond aggressively to price inflation deliver near-optimal equilibrium allocations. Third, interest rate rules that respond to deviations of output from trend may carry significant welfare costs. Fourth, the zero bound on nominal interest rates does not appear to be a significant obstacle for the actual implementation of low and stable ...
Economic Quarterly , Volume 94 , Issue Fall , Pages 435-465

Conference Paper
Incomplete cost pass-through under deep habits


Working Paper
Price level determinacy and monetary policy under a balanced-budget requirement

This paper analyzes the implications of a balanced budget fiscal policy rule for the determinacy of the price level in a cash-in-advance economy under three alternative monetary policy regimes. It shows that, in such stylized models with flexible prices and a period-by-period balanced budget requirement, the price level is determinate under a money growth rate peg and is indeterminate under a pure nominal interest rate peg. Under a feedback rule whereby the nominal interest rate is set as an increasing function of the inflation rate, the price level is determinate for intermediate values of ...
Finance and Economics Discussion Series , Paper 1997-17

Working Paper
The international transmission of economic fluctuations: effects of U. S. business cycles on the Canadian economy

Finance and Economics Discussion Series , Paper 95-6

Working Paper
Endogenous business cycles and the dynamics of output, hours, and consumption

This paper studies the business-cycle fluctuations predicted by a two-sector endogenous-business-cycle model with sector-specific external increasing returns to scale. It focuses on aspects of actual fluctuations that have been identified both as defining features of the business cycle and as ones that standard real-business-cycle models cannot explain: the autocorrelation function of output growth, the impulse response function of output to demand shocks, and the forecastable movements of output, hours, and consumption. For empirically realistic calibrations of the degree of sector-specific ...
Finance and Economics Discussion Series , Paper 1998-19

Working Paper
Comparing four models of aggregate fluctuations due to self-fulfilling expectations

Finance and Economics Discussion Series , Paper 95-17

Conference Paper
Backward-looking interest-rate rules, interest-rate smoothing, and macroeconomic instability

The existing literature on the stabilizing properties of interest-rate feedback rules has stressed the perils of linking interest rates to forecasts of future inflation. Such rules have been found to give rise to aggregate fluctuations due to self-fulfilling expectations. In response to this concern, a growing literature has focused on the stabilizing properties of interest-rate rules whereby the central bank responds to a measure of past inflation. The consensus view that has emerged is that backward-looking rules contribute to protecting the economy from embarking on expectations-driven ...

Conference Paper
Stabilization policy and the costs of dollarization


Conference Paper
Optimal fiscal and monetary policy under sticky prices

This paper studies optimal fiscal and monetary policy under sticky product prices. The theoretical framework is a stochastic production economy without capital. The government finances an exogenous stream of purchases by levying distortionary income taxes, printing money, and issuing one-period nominally risk free bonds. The main findings of the paper are: First, for a miniscule degree of price stickiness (i.e., many times below available empirical estimates), the optimal volatility of inflation is near zero. This result stands in stark contrast with the high volatility of inflation implied ...
Proceedings , Issue Jun


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