National Bureau of Economic Research Working PapersThe Latest NBER Working Papers
http://www.nber.org/new.html
A Shadow Rate New Keynesian Model -- by Jing Cynthia Wu, Ji ZhangWe propose a New Keynesian model with the shadow rate, which is the federal funds rate during normal times. At the zero lower bound, we establish empirically the negative shadow rate summarizes unconventional monetary policy with its resemblance to private interest rates, the Fed's balance sheet, and Taylor rule. Theoretically, we formalize our shadow rate New Keynesian model with QE and lending facilities. Our model generates data-consistent results: a negative supply shock is always contractionary. It also salvages the New Keynesian model from the zero lower bound induced structural break.
http://papers.nber.org/papers/w22856#fromrss
http://papers.nber.org/papers/w22856#fromrssIs The Monetarist Arithmetic Unpleasant? -- by Martin UribeThe unpleasant monetarist arithmetic of Sargent and Wallace (1981) states that in a fiscally dominant regime tighter money now can cause higher inflation in the future. In spite of the qualifier 'unpleasant,' this result is positive in nature, and, therefore, void of normative content. I analyze conditions under which it is optimal in a welfare sense for the central bank to delay inflation by issuing debt to finance part of the fiscal deficit. The analysis is conducted in the context of a model in which the aforementioned monetarist arithmetic holds, in the sense that if the government finds it optimal to delay inflation, it does so knowing that it would result in higher inflation in the future. The central result of the paper is that delaying inflation is optimal when the fiscal deficit is expected to decline over time.
http://papers.nber.org/papers/w22866#fromrss
http://papers.nber.org/papers/w22866#fromrss