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Does the New Keynesian Model Have a Uniqueness Problem? -- by Lawrence Christiano, Martin S. Eichenbaum, Benjamin K. JohannsenThis paper addresses whether non-uniqueness of equilibrium is a substantive problem for the analysis of fiscal policy in New-Keynesian (NK) models at the zero lower bound (ZLB). There would be a substantive problem if there were no compelling way to select among different equilibria that give different answers to critical policy questions. We argue that learnability provides such a criterion. We study a fully non-linear NK model with Calvo pricing frictions. Our main finding is that the model we analyze has a unique E-stable rational expectations equilibrium at the ZLB. That equilibrium is also stable-under-learning and inherits all of the key properties of linearized NK models for fiscal policy.
http://papers.nber.org/papers/w24612#fromrss
http://papers.nber.org/papers/w24612#fromrssHave R&D Spillovers Changed? -- by Brian Lucking, Nicholas Bloom, John Van ReenenThis paper revisits the results of Bloom, Schankerman, and Van Reenen (2013) examining the impact of R&D on the performance of US firms, especially through spillovers. We extend their analysis to include an additional 15 years of data through 2015, and update the measures of firms' interactions in technology space and product market space. We show that the magnitude of R&D spillovers appears to have been broadly similar in the second decade of the 21st Century as it was in the mid-1980s. However, there does seem to have been some increase in the wedge between marginal social returns to R&D and marginal private returns with the ratio of marginal social to private returns increasing to a factor of 4 from 3. There is certainly no evidence that the divergence between public and private return has narrowed. Positive spillovers appeared to increase in the 1995-2004 boom.
http://papers.nber.org/papers/w24622#fromrss
http://papers.nber.org/papers/w24622#fromrssLeaning Against Housing Prices as Robustly Optimal Monetary Policy -- by Klaus Adam, Michael WoodfordWe analytically characterize optimal monetary policy for a New Keynesian model with a housing sector. If one supposes that the private sector has rational expectations about future housing prices and inflation, optimal monetary policy can be characterized without making reference to housing price developments: commitment to a "target criterion" that refers only to inflation and the output gap is optimal, as in the standard model without a housing sector. But when a policymaker seeks to choose a policy that is robust to potential departures of private sector expectations from model-consistent ones, then the optimal target criterion must also depend on housing prices. In the empirically realistic case where housing is subsidized and where monopoly power causes output to fall short of its optimal level, the robustly optimal target criterion requires the central bank to "lean against" housing prices: following unexpected housing price increases, policy should adopt a stance that is projected to undershoot its normal targets for inflation and the output gap, and similarly aim to overshoot those targets in the case of unexpected declines in housing prices. The robustly optimal target criterion does not require that policy distinguish between "fundamental" and "non-fundamental" movements in housing prices.
http://papers.nber.org/papers/w24629#fromrss
http://papers.nber.org/papers/w24629#fromrss