Optimal Fiscal and Monetary Policy with Sticky Wages and Sticky Prices PDF Download

Author: Sanjay K. Chugh
Publisher:
ISBN:
Category : Fiscal policy
Languages : en
Pages : 40

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Author: David M. Arseneau
Publisher:
ISBN:
Category : Collective bargaining
Languages : en
Pages : 64

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Author: Henry E. Siu
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Kenneth S. Rogoff
Publisher: MIT Press
ISBN: 0262072726
Category : Business & Economics
Languages : en
Pages : 479

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The 20th NBER Macroeconomics Annual, covering questions at the cutting edge of macroeconomics that are central to current policy debates.

Author: Levon Barseghyan
Publisher:
ISBN:
Category : Monetary policy
Languages : en
Pages : 0

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Author:
Publisher:
ISBN:
Category : Monetary policy
Languages : en
Pages :

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"In economies with sticky-information wage setting, policymakers legitimately give attention to output stabilization as well as price-level or inflation stabilization. Consistent with Kydland and Prescott (1990), trend deviations in prices are predicted to be negatively correlated with trend deviations in output. A variant of the Taylor rule is optimal if household consumption decisions are forward-looking. Interestingly, it is essential that policy not be made contingent on the most up-to-date estimates of potential output, potential-output growth, or the natural real interest rate. New results on the "persistence problem" and a new rationalization for McCallum's P-bar inflation equation are also presented"--Federal Reserve Bank of Dallas web site.

Author: Davide Debortoli
Publisher: International Monetary Fund
ISBN: 1484311752
Category : Business & Economics
Languages : en
Pages : 56

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Yes, it makes a lot of sense. This paper studies how to design simple loss functions for central banks, as parsimonious approximations to social welfare. We show, both analytically and quantitatively, that simple loss functions should feature a high weight on measures of economic activity, sometimes even larger than the weight on inflation. Two main factors drive our result. First, stabilizing economic activity also stabilizes other welfare relevant variables. Second, the estimated model features mitigated inflation distortions due to a low elasticity of substitution between monopolistic goods and a low interest rate sensitivity of demand. The result holds up in the presence of measurement errors, with large shocks that generate a trade-off between stabilizing inflation and resource utilization, and also when ensuring a low probability of hitting the zero lower bound on interest rates.

Author: Ben S. Bernanke
Publisher: University of Chicago Press
ISBN: 0226044734
Category : Business & Economics
Languages : en
Pages : 469

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Over the past fifteen years, a significant number of industrialized and middle-income countries have adopted inflation targeting as a framework for monetary policymaking. As the name suggests, in such inflation-targeting regimes, the central bank is responsible for achieving a publicly announced target for the inflation rate. While the objective of controlling inflation enjoys wide support among both academic experts and policymakers, and while the countries that have followed this model have generally experienced good macroeconomic outcomes, many important questions about inflation targeting remain. In Inflation Targeting, a distinguished group of contributors explores the many underexamined dimensions of inflation targeting—its potential, its successes, and its limitations—from both a theoretical and an empirical standpoint, and for both developed and emerging economies. The volume opens with a discussion of the optimal formulation of inflation-targeting policy and continues with a debate about the desirability of such a model for the United States. The concluding chapters discuss the special problems of inflation targeting in emerging markets, including the Czech Republic, Poland, and Hungary.

Author: S. Boragan Aruoba
Publisher:
ISBN:
Category : Economic policy
Languages : en
Pages : 60

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Author: Christopher J. Erceg
Publisher:
ISBN:
Category : Employment (Economic theory)
Languages : en
Pages : 50

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We formulate an optimizing-agent model in which both labor and product markets exhibit monopolistic competition and staggered nominal contracts. The unconditional expectation of average household utility can be expressed in terms of the unconditional variances of the output gap, price inflation, and wage inflation. Monetary policy cannot replicate the Pareto-optimal equilibrium that would occur under completely flexible wages and prices; that is, the model exhibits a tradeoff between stabilizing the output gap, price inflation, and wage inflation. The Pareto optimum is attainable only if either wages or prices are completely flexible. For reasonable calibrations of the model, we characterize the optimal policy rule. Furthermore, strict price inflation targeting is clearly suboptimal, whereas rules that also respond to either the output gap or wage inflation are nearly optimal.