The Optimal Inflation Rate in New Keynesian Models
College of William and Mary; University of California, Berkeley; University of California, Berkeley
New Keynesian model with Calvo pricing, positive steady-state inflation, zero lower bound on interest rates, Taylor rule monetary policy, risk premium shocks, government spending shocks, cost-push shocks, technology shocks, and monetary policy 
intermediate goods firms: monopolistic competition with Calvo pricing; final goods firms: perfect competition with CES aggregator
Figure 6
Risk premium shock persistence rho_q = 0.96