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-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 …
Persistent link: https://www.econbiz.de/10005712759
the special case in which prices are sticky and wages are perfectly flexible. When the model is calibrated to exhibit an …
Persistent link: https://www.econbiz.de/10005368225
If price levels are initially different across the euro area, convergence to a common level of prices would imply that … inflation will be higher in countries where prices are initially low. Price level convergence thus provides a potential … between 1990 and 1999 prices did become less dispersed in the euro area. Convergence is especially evident for traded goods …
Persistent link: https://www.econbiz.de/10005368283
In a stylized DSGE model with an energy sector, the optimal policy response to an adverse energy supply shock implies a rise in core inflation, a larger rise in headline inflation, and a decline in wage inflation. The optimal policy is well-approximated by policies that stabilize the output gap,...
Persistent link: https://www.econbiz.de/10005368420
aggregate price level and to demonstrate econometrically its equivalence to the exogeneity of relative prices with respect to … role for supply-side disturbances in explaining comovements in aggregate and relative prices. …
Persistent link: https://www.econbiz.de/10005498851
Our paper analyses the effects of restrictions on capital mobility on the output-inflation tradeoff. Using a stochastic version of the Mundell-Fleming model, we establish a theoretical presumption that an increase in restrictions on capital mobility should make the tradeoff parameter smaller,...
Persistent link: https://www.econbiz.de/10005712628
Using over 100 years of U.S. data, we find that the long-run effects of inflation on consumption, investment, and output are positive. Thus, models generating long-term negative effects of inflation on output and consumption (including endogenous growth and RBC models with money) seem to be at...
Persistent link: https://www.econbiz.de/10005712640
We survey the recent experiences of three industrial countries -- New Zealand, Canada, and the United Kingdom -- that have announced specific targets for inflation. Despite success on the part of the targeting central banks in attaining their inflation goals thus far, bond yields suggest that...
Persistent link: https://www.econbiz.de/10005712663
This paper estimates potential output for seven countries using a multivariate version of the Hodrick-Prescott filter in which observations on inflation are used to help separate trend from cyclical movements in output. The potential series are estimated first on an aggregate basis, and then by...
Persistent link: https://www.econbiz.de/10005712672
We argue that there are conditions such that any inflation targeting regime is preferable to full policy discretion, even if long-run inflation rates are identical across regimes. The key observation is that strict inflation targeting outperforms the discretionary policy response to sufficiently...
Persistent link: https://www.econbiz.de/10005712716