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Monetary policy analyses usually assume an atomistic private sector, thereby ignoring potential interactions between policy and wage-setting decisions. Yet, non-atomistic wage setters are a key feature of several industrialized economies. We study the economic consequence of non-atomistic agents...
Persistent link: https://www.econbiz.de/10014084801
Persistent link: https://www.econbiz.de/10003470312
estimate the U.S. central bank's ex ante perceptions of the natural rate of unemployment. Relative to retrospective estimates …, empirical results do not indicate severe underestimation of the natural rate of unemployment in the 1970s …
Persistent link: https://www.econbiz.de/10014061678
This paper first shows that the forecast error incurred when assuming that future inflation will be equal to the inflation target announced by the central bank is typically at least as small and often smaller than forecast errors of model-based and published inflation forecasts. It then shows...
Persistent link: https://www.econbiz.de/10011604610
In a sticky-price model where firms finance their production inputs, there is both a lower and an upper bound on the central bank's inflation response necessary to rule out the possibility of self-fulfilling inflation expectations. This paper shows that real wage rigidities decrease this upper...
Persistent link: https://www.econbiz.de/10013004074
Lucas (1972) is the pathbreaking analysis of the neutrality and temporary non-neutrality of money. But our central banks set interest rate targets, and do not even pretend to control money supplies. How is inflation determined under an interest rate target? We finally have a complete theory of...
Persistent link: https://www.econbiz.de/10014030012
We introduce bounded rationality, along the lines of Gabaix (2020), in a canonical New Keynesian model calibrated to match Canadian macroeconomic data since Canada's adoption of inflation targeting. We use the model to provide a quantitative assessment of the macroeconomic impact of flexible...
Persistent link: https://www.econbiz.de/10013161512
Neo-Fisherites argue that conventional central banking wisdom has inflation control wrong, in that the way to increase (reduce) inflation is to increase (reduce) the central bank’s nominal interest rate target
Persistent link: https://www.econbiz.de/10012852087
We use a standard new Keynesian model to evaluate the cost of disinflation - measured by the sacrifice ratio, the central bank's loss function, and the welfare cost - in a small open economy vis-à-vis a closed economy. Disinflation is either more costly or less beneficial in the small open...
Persistent link: https://www.econbiz.de/10012695263
Unconventional monetary easing conducted by the Bank of Japan (BOJ) since 2013 has contributed to the yen's depreciation, higher stock prices, and higher corporate profits. Meanwhile, the impacts on aggregate demand and inflation have not been as strong as the BOJ expected while the adverse...
Persistent link: https://www.econbiz.de/10011936118