This chapter reviews the theory of optimal monetary stabilization policy in New Keynesian
models, with particular emphasis on developments since the treatment of this topic in …

We discuss the theoretical rationale for central bank communication about future policy
rates, either as part of inflation targeting or in the form of forward guidance. We also …

We argue that an influential neo-Fisherian analysis of the effects of low interest rates
depends on using perfect-foresight equilibrium analysis under circumstances where it is not …

Central banks' announcements that rates are expected to remain low could signal either a
weak macroeconomic outlook, which would slow expenditures, or a more accommodative …

Many new-Keynesian models produce a deep recession with deflation at the zero bound.
These models also make unusual policy predictions: Useless government spending …

I show that the nature of the Federal Open Market Committee's (FOMC's) forward guidance
language shapes the private sector's responses to monetary policy statements. From …

The common sticky-prices New-Keynesian model behaves differently in a zero-lower bound
environment. Fiscal and forward guidance multipliers can be very large. Positive supply …

This paper is an exploratory analysis of the role that banks play in supporting what Jevons
called the “mechanism of exchange.” It considers a model economy in which exchange …

Policymakers and academics have long maintained that nominal interest rates face a zero
lower bound (ZLB), which can only be breached through major institutional changes like the …

The viability of forward guidance as a monetary policy tool depends on the horizon over
which it can be communicated and its influence on expectations over that horizon. This …