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for the unemployment-inflation tradeoff and for the conduct of monetary policy.<br><br>We proceed in two steps. We first … setting by firms. We derive the relation between inflation and unemployment and discuss how it is influenced by the presence … of labor market frictions and real wage rigidities. We show the nature of the tradeoff between inflation and unemployment …
Persistent link: https://www.econbiz.de/10005248798
We describe some of the main features of the recent vintage macroeconomic models used for monetary policy evaluation. We point to some of the key differences with respect to the earlier generation of macro models, and highlight the insights for policy that these new frameworks have to offer. Our...
Persistent link: https://www.econbiz.de/10005084740
Galí and Gertler (1999) developed a hybrid variant of the New Keynesian Phillips curve that relates inflation to real … marginal cost, expected future inflation and lagged inflation. GMM estimates of the model suggest that forward looking behavior … is dominant: The coefficient on expected future inflation substantially exceeds the coefficient on lagged inflation …
Persistent link: https://www.econbiz.de/10005050432
as a tool to compare the characteristics of European inflation dynamics with those observed in the U.S. We also analyze … the factors underlying inflation inertia by examining the cyclical behavior of marginal costs, as well as that of its two … is substantial, but in line with survey evidence and U.S. estimates, (c) inflation dynamics in the Euro area appear to …
Persistent link: https://www.econbiz.de/10005575147
We develop and estimate a structural model of inflation that allows for a fraction of firms that use a backward looking … measures of arginal cost as the relevant determinant of inflation, as the theory suggests, instead of an ad-hoc output gap …. Real marginal costs are a significant and quantitatively important determinant of inflation. Backward looking price setting …
Persistent link: https://www.econbiz.de/10005579953
and its implications for U.S. output, hours and inflation. Second, we evaluate the extent to which those responses can be … the Fed's policy tended to over stabilize output at the cost of generating excessive inflation volatility. Our evidence …
Persistent link: https://www.econbiz.de/10005580101
inflation and unemployment. Under some assumptions, that relation takes a form similar to that found in empirical applications … structural wage equation derived here is shown to account reasonably well for the comovement of wage inflation and the …
Persistent link: https://www.econbiz.de/10008615779
We reformulate the Smets-Wouters (2007) framework by embedding the theory of unemployment proposed in Galí (2011a,b). We estimate the resulting model using postwar U.S. data, while treating the unemployment rate as an additional observable variable. Our approach overcomes the lack of...
Persistent link: https://www.econbiz.de/10009025236