Expectation traps and Neo-Fisherian policy
University of Illinois at Chicago
Three-period overlapping generations New Keynesian model with borrowing constraints, heterogeneous agents (young, middle-aged, old), incomplete markets, and non-rational subjective expectations formation including adaptive learning and extrapol
monopolistic competition with linear production technology in labor; Calvo or Rotemberg price rigidity
High inflation steady state at target inflation pi_H = pi* = 1.02 (2% annual)
Full employment steady state described as the intended equilibrium by monetary policy