Javier Valles

Research Dept.
Banco de Espana
Alcala 50
28014 Madrid SPAIN

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NBER Working Papers and Publications

August 2005Understanding the Effects of Government Spending on Consumption
with Jordi Galí, J. David López-Salido: w11578
Recent evidence suggests that consumption rises in response to an increase in government spending. That finding cannot be easily reconciled with existing optimizing business cycle models. We extend the standard new Keynesian model to allow for the presence of rule-of-thumb consumers. We show how the interaction of the latter with sticky prices and deficit financing can account for the existing evidence on the effects of government spending.


March 2004Rule-of-Thumb Consumers and the Design of Interest Rate Rules
with Jordi Gali, J. David Lopez-Salido: w10392
We introduce rule-of-thumb consumers in an otherwise standard dynamic sticky price model, and show how their presence can change dramatically the properties of widely used interest rate rules. In particular, the existence of a unique equilibrium is no longer guaranteed by an interest rate rule that satisfies the so called Taylor principle. Our findings call for caution when using estimates of interest rate rules in order to assess the merits of monetary policy in specific historical periods.

Published: Gali, Jordi, J. David Lopez-Salido and Javier Valles. "Rule-of-Thumb Consumers And The Design Of Interest Rate Rules," Journal of Money, Credit and Banking, 2004, v36(4,Aug), 739-763.

February 2002Technology Shocks and Monetary Policy: Assessing the Fed's Performance
with Jordi Gali, J. David Lopez-Salido: w8768
The purpose of the present paper is twofold. First, we characterize the Fed's systematic response to technology shocks and its implications for U.S. output, hours and inflation. Second, we evaluate the extent to which those responses can be accounted for by a simple monetary policy rule (including the optimal one) in the context of a standard business cycle model with sticky prices. Our main results can be described as follows: First, we detect significant differences across periods in the response of the economy (as well as the Fed's) to a technology shock. Second, the Fed's response to a technology shock in the Volcker-Greenspan period is consistent with an optimal monetary policy rule. Third, in the pre-Volcker period the Fed's policy tended to over stabilize output at the cost of gener...

Published: Gali, Jordi, J. David Lopez-Salido and Javier Valles. "Technology Shocks And Monetary Policy: Assessing The Fed's Performance," Journal of Monetary Economics, 2003, v50(4,May), 723-743. citation courtesy of

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