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Habit Formation in Consumption and Its Implications for Monetary Policy Models
This paper explores a monetary-policy model with habit formation for consumers, in which consumers' utility depends in part on current consumption relative to past consumption. The empirical testsExpand
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The [un]importance of forward-looking behavior in price specifications
The seminal work of Edmund S. Phelps (1978), John B. Taylor (1980), and Guillermo A. Calvo (1983) developed forward-looking models of price determination that imparted inertia to the price level.Expand
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Inflation Persistence
This chapter examines the concept of inflation persistence in macroeconomic theory. It begins with a definition of persistence, emphasizing the difference between reduced-form and structuralExpand
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Monetary Policy Trade-offs and the Correlation between Nominal Interest Rates and Real Output
The authors present a structural model of the U.S. economy that combines their price-contracting specification with a term-structure relationship, an aggregate demand curve, and a monetary-policyExpand
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Inflation/Output Variance Trade-Offs and Optimal Monetary Policy
The author estimates the inflation/output-gap variance trade-off faced by monetary policymakers in the United States. For policymakers who care about deviations of inflation around target and outputExpand
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Dynamic Inconsistencies: Counterfactual Implications of a Class of Rational-Expectations Models
A number of recent papers have developed dynamic macroeconomic models that incorporate rational expectations and optimizing foundations. While the theoretical motivation behind these models is sound,Expand
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Monetary Policy Shifts and Long-Term Interest Rates
The Pure Expectations Hypothesis (PEH) serves as the benchmark model for the relationship between yields on bonds of different maturities. When coupled with rational expectations, however, empiricalExpand
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Intrinsic and Inherited Inflation Persistence
In the conventional view of inflation, the New Keynesian Phillips curve (NKPC) captures most of the persistence in inflation. The sources of persistence are twofold. First, the "driving process" forExpand
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Monetary Policy Shifts and the Stability of Monetary Policy Models
Since the publication (1976) of the classic Lucas critique, researchers in empirical macroeconomics have endeavored to specify models that capture the underlying dynamic decision-making behavior ofExpand
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New data on worker flows during business cycles
The most obvious economic cost of recessions is that workers become involuntarily unemployed. During the average business cycle contraction, total employment declines by about 1.5 percent, theExpand
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