Benjamin K. Johannsen
Board of Governors of the Federal Reserve System
20th and C Streets, N.W.
Washington, DC 20551
Institutional Affiliation: Federal Reserve Board
NBER Working Papers and Publications
|May 2018||Does the New Keynesian Model Have a Uniqueness Problem?|
with Lawrence Christiano, Martin S. Eichenbaum: w24612
This 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.
|February 2017||Monetary Policy and the Predictability of Nominal Exchange Rates|
with Martin Eichenbaum, Sergio Rebelo: w23158
This paper studies how the monetary policy regime affects the relative importance of nominal exchange rates and inflation rates in shaping the response of real exchange rates to shocks. We document two facts about countries with floating exchange rates where monetary policy controls inflation using a short-term interest rate. First, the current real exchange rate predicts future changes in the nominal exchange rate. Out-of-sample forecasts based on the real exchange rate outperform random walk models at medium and long horizons. Second, the real exchange rate is a poor predictor of future inflation rates. These facts do not hold in countries under quasi-fixed exchange rate regimes, crawling-peg regimes or heavily managed floating exchange rate regimes. We construct an open-economy model th...