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Monetary Policy and Bubbles in New Keynesian Model with Overlapping Generations

Jordi Galí ()

No 14887, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Asset Price Volatility; Economic Fluctuations; monetary policy rules; Stabilization policies (search for similar items in EconPapers)
JEL-codes: E44 E52 (search for similar items in EconPapers)
Date: 2020-06
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Related works:
Working Paper: Monetary Policy and Bubbles in a New Keynesian Model with Overlapping Generations (2020) Downloads
Working Paper: Monetary policy and bubbles in a new Keynesian model with overlapping generations (2020) Downloads
Working Paper: Monetary Policy and Bubbles in a New Keynesian Model with Overlapping Generations (2017) Downloads
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