Monetary Policy and Bubbles in a New Keynesian Model with Overlapping Generations

Jordi Galí

American Economic Journal: Macroeconomics, 2021, vol. 13, issue 2, 121-67

Abstract: I analyze an extension of the New Keynesian model that features overlapping generations of finitely lived agents and (stochastic) transitions to inactivity. In contrast with the standard model, the proposed framework allows for the existence of rational expectations equilibria with asset price bubbles. I study the conditions under which bubble-driven fluctuations may emerge and the type of monetary policy rules that may prevent them. I conclude by discussing some of the model's welfare implications.

JEL-codes: E12 E32 E44 E52 E63 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Monetary Policy and Bubbles in New Keynesian Model with Overlapping Generations (2020)
Working Paper: Monetary Policy and Bubbles in a New Keynesian Model with Overlapping Generations (2020)
Working Paper: Monetary Policy and Bubbles in a New Keynesian Model with Overlapping Generations (2017)
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DOI: 10.1257/mac.20180427

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