The canonical inflation specification in sticky-price rational expectations models (the new-Keynesian Phillips curve) is often criticized for failing to account for the dependence of inflation on its own lags. In response, many studies employ a “hybrid” specification in which inflation...

This paper presents empirical evidence on the hypothesis that aggregate price disturbances cause or worsen financial distress. We construct two annual indexes of financial conditions for the United States covering 1790-1997, and estimate the effect of aggregate price shocks on each index using a...

This paper investigates the impact historically of aggregate price shocks on financial stability in the United Kingdom. We construct an annual index of U.K. financial conditions for 1790-1999 and use a dynamic probit model to estimate the effect of aggregate price shocks on the index. We find...

Related links: http://www.richmondfed.org/publications/research/region_focus/2011/q4/feature1_weblinks.cfm

Presented at Indiana University.

Presented at New Perspectives on Monetary Policy Design. Sponsored by the Bank of Canada and the Centre De Recerca en Economia Internacional. Barcelona, Spain.