#2007-005C "Money and the Natural Rate of Interest: Structural Estimates for the United States and the Euro Area"
by Javier Andrés, J. David López-Salido, and Edward Nelson
February 2007
Revised April 2008

We examine the role of money in three environments: the New Keynesian model with separable utility and static money demand; a nonseparable utility variant with habit formation; and a version with adjustment costs for holding real balances. More...

#2005-018A "Sticky-Price Models and the Natural Rate Hypothesis"
by Javier Andrés, J. David López-Salido, and Edward Nelson
March 2005

A major criticism of standard specifications of price adjustment in models for monetary policy analysis is that they violate the natural rate hypothesis by allowing output to differ from potential in steady state. In this paper we estimate a dynamic optimizing business cycle model whose price-setting behavior satisfies the natural rate hypothesis. More...

PUBLISHED: Journal of Monetary Economics, July 2005, 52(5), pp. 1025-53

#2004-003A "Tobin's Imperfect Asset Substitution in Optimizing General Equilibrium"
by Javier Andrés, J. David López-Salido, and Edward Nelson
February 2004

In this paper, we present a dynamic optimizing model that allows explicitly for imperfect substitutability between different financial assets. This is specified in a manner which captures Tobin's (1969) view that an expansion of one asset's supply affects both the yield on that asset and the spread or "risk premium" between returns on that asset and alternative assets. More...

PUBLISHED: Journal of Money, Credit, and Banking, August 2004, 36(4), pp. 665-90