Sectoral Price Rigidity and Aggregate Dynamics PDF Download

Author: Hafedh Bouakez
Publisher:
ISBN: 9782893825724
Category : Economics
Languages : en
Pages : 51

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Author: Carlos Carvalho
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Book Description
We analyze the effects of heterogeneity in price setting behavior in time-dependent sticky price and sticky information models characterized by quite general adjustment hazard functions. In a large class of models that includes the most commonly used price setting specifications, heterogeneity leads monetary shocks to have larger real effects than in one-sector economies with the same frequency of adjustments. Quantitatively, the effects of heterogeneity in models calibrated to match the recent empirical evidence on pricing behavior are large, even in the absence of strategic complementarity in price setting. We find that the degree of monetary non-neutrality in the calibrated heterogeneous economies can be as large as in an otherwise identical one-sector economy with roughly three times more nominal rigidity.

Author: Yury Yatsynovich
Publisher:
ISBN:
Category :
Languages : en
Pages : 83

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Book Description
In the current thesis I investigate the impact of sectoral structure of the economy on some aspects of its short-run fluctuations and long-run trends. In the first chapter -- "Cost Structure and Price Rigidity across Sectors"--I model a mechanism through which the structure of costs of producers can affect producers' decisions on the frequency of adjusting prices. First, I establish an empirical observation that sectors which are characterized by either a higher share of labor or more diversified structure of bundles of intermediate goods are characterized by more rigid prices. Then I build and solve a partial equilibrium model that describes optimal price-setting strategies of firms in different sectors. The model provides an explanation for heterogeneity in price rigidity across different sectors. The calibrated model can be used for predicting how changes in the production processes and in the structure of costs can affect the heterogeneity of price rigidity across sectors and, hence, the aggregate price rigidity in the economy. In the second chapter -- "Technological Spillovers and Dynamics of Comparative Advantage"--I investigate the question of the evolution of sector productivity and comparative advantage under the presence of cross-sector technological spillovers. For that I develop a dynamic model of international trade with cross-sector spillovers. In addition to the standard effect of comparative advantage on labor allocation, the model accounts for the effects of labor allocation on the sector productivity and comparative advantage. The core mechanism is a combination of an idea-generating process within each sector and technological spillovers across sectors. I establish necessary and sufficient conditions for the existence and uniqueness of a balanced growth path and describe the conditions under which a welfare-improving industrial policy is possible. I calibrate the model using the US patent data to parametrize the strength of technological spillovers and use the model to describe the optimal industrial policy.

Author: Nathan S. Balke
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Price changes and output growth, both at the aggregate and the sectoral level, appear to be negatively correlated. At a basic level, this suggests that sectoral “supply” shocks are more prevalent than sectoral “demand” shocks. However, it is not clear what these sectoral price-output correlations mean once one thinks in terms of general equilibrium. To help us understand the implication of these price-output correlations, this paper examines a multi-sector dynamic general equilibrium model that includes sectoral technology shocks and sectoral demand shocks, as well as aggregate money growth shocks. We show that while a model driven solely by sectoral technology shocks can generate “plausible” price-output correlations, “demand” shocks, particularly sectoral demand shocks, are needed for the model to generate the sectoral price-output correlations observed in the data. We also show that technology shocks do not always look like “supply” shocks. Positive technology shocks to sectors producing goods that are used for investment frequently result in increases in output and prices in other sectors while positive technology shocks to sectors producing goods that are used primarily as intermediate inputs look like supply shocks in other sectors.

Author: Alessandro Cantelmo
Publisher: International Monetary Fund
ISBN: 1475584784
Category : Business & Economics
Languages : en
Pages : 33

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In an estimated two-sector New-Keynesian model with durable and nondurable goods, an inverse relationship between sectoral labor mobility and the optimal weight the central bank should attach to durables inflation arises. The combination of nominal wage stickiness and limited labor mobility leads to a nonzero optimal weight for durables inflation even if durables prices were fully flexible. These results survive alternative calibrations and interestrate rules and point toward a non-negligible role of sectoral labor mobility for the conduct of monetary policy.

Author: Jordi Galí
Publisher: University of Chicago Press
ISBN: 0226278875
Category : Business & Economics
Languages : en
Pages : 663

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Book Description
United States monetary policy has traditionally been modeled under the assumption that the domestic economy is immune to international factors and exogenous shocks. Such an assumption is increasingly unrealistic in the age of integrated capital markets, tightened links between national economies, and reduced trading costs. International Dimensions of Monetary Policy brings together fresh research to address the repercussions of the continuing evolution toward globalization for the conduct of monetary policy. In this comprehensive book, the authors examine the real and potential effects of increased openness and exposure to international economic dynamics from a variety of perspectives. Their findings reveal that central banks continue to influence decisively domestic economic outcomes—even inflation—suggesting that international factors may have a limited role in national performance. International Dimensions of Monetary Policy will lead the way in analyzing monetary policy measures in complex economies.

Author: Ms.Valerie Cerra
Publisher: International Monetary Fund
ISBN: 1513536990
Category : Business & Economics
Languages : en
Pages : 50

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Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as “hysteresis,” argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and theoretical literature that motivate this paradigm shift. The renewed interest in hysteresis has been sparked by the persistence of the Global Financial Crisis and fears of a slow recovery from the Covid-19 crisis. The findings of the recent literature have far-reaching conceptual and policy implications. In recessions, monetary and fiscal policies need to be more active to avoid the permanent scars of a downturn. And in good times, running a high-pressure economy could have permanent positive effects.

Author: Jordi Galí
Publisher: Princeton University Press
ISBN: 1400866278
Category : Business & Economics
Languages : en
Pages : 295

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Book Description
The classic introduction to the New Keynesian economic model This revised second edition of Monetary Policy, Inflation, and the Business Cycle provides a rigorous graduate-level introduction to the New Keynesian framework and its applications to monetary policy. The New Keynesian framework is the workhorse for the analysis of monetary policy and its implications for inflation, economic fluctuations, and welfare. A backbone of the new generation of medium-scale models under development at major central banks and international policy institutions, the framework provides the theoretical underpinnings for the price stability–oriented strategies adopted by most central banks in the industrialized world. Using a canonical version of the New Keynesian model as a reference, Jordi Galí explores various issues pertaining to monetary policy's design, including optimal monetary policy and the desirability of simple policy rules. He analyzes several extensions of the baseline model, allowing for cost-push shocks, nominal wage rigidities, and open economy factors. In each case, the effects on monetary policy are addressed, with emphasis on the desirability of inflation-targeting policies. New material includes the zero lower bound on nominal interest rates and an analysis of unemployment’s significance for monetary policy. The most up-to-date introduction to the New Keynesian framework available A single benchmark model used throughout New materials and exercises included An ideal resource for graduate students, researchers, and market analysts

Author: Callum Jones
Publisher: International Monetary Fund
ISBN: 1484374983
Category : Business & Economics
Languages : en
Pages : 51

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Book Description
We evaluate and partially challenge the ‘household leverage’ view of the Great Recession. In the data, employment and consumption declined more in states where household debt declined more. We study a model where liquidity constraints amplify the response of consumption and employment to changes in debt. We estimate the model with Bayesian methods combining state and aggregate data. Changes in household credit limits explain 40 percent of the differential rise and fall of employment across states, but a small fraction of the aggregate employment decline in 2008-2010. Nevertheless, since household deleveraging was gradual, credit shocks greatly slowed the recovery.

Author: Robert M. Solow
Publisher: MIT Press
ISBN: 9780262041102
Category : Business & Economics
Languages : en
Pages : 262

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Book Description
The essays in this book extend and elaborate on many of the important ideas Solow has either originated or developed in the past three decades.