The conventional New Keynesian Phillips Curve (NKPC), driven by unit labor costs has been criticized for failing to match inflation dynamics and for explaining the duration of fixed price contracts. This paper extends recent attempts in the literature to find an alternative marginal cost proxy...

The bulk of literature on real rigidity attempts to identify sources of real rigidity in market imperfections while assuming that the money supply is exogenously set. This paper shows that monetary policy preferences affect the responsiveness of marginal cost to output and through this channel...

We use a simple model to show that there is a positive relationship between monetary policy preferences for output stability, real rigidity and macroeconomic persistence. This result has two non-trivial implications. First it suggests that output stabilization may be a less desirable policy...

This paper examines how success-at-work, interpreted by both subjective and relative criteria, can motivate individuals to enhance their effort and utility. We employ a general specification utility function and show that the final effect of technological growth on individuals' effort and...

Using a microfounded general equilibrium model, this paper shows that when large monopolistic firms or unions perceive even a small influence on aggregate nominal variables, price targeting results in a higher equilibrium output than monetary accommodation. This is because price targeting...

This article points to the potential role of monetary policy in affecting the degree of real wage cyclicality. We show that the degree and direction of real wage cyclicality is determined by the interaction of (i) the returns to scale in production, (ii) the nature of aggregate shocks and (iii)...

This paper argues that the adoption of an inflation target reduces the persistence of inflation.We develop the theoretical literature on inflation persistence by introducing a Taylor rule for monetary policy into a model of persistence and showing that inflation targets reduce inflation...