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A unifed framework for understanding and comparing dynamic wage and price setting models

Dixon, Huw David - 2009

This paper argues that the cross-sectional approach to durations is essential to understand nominal rigidity because this captures the fact that price-spells are generated by firms' price-setting behavior. Since the distribution of durations is dominated by a proliferation of short contracts,...

Persistent link: https://www.econbiz.de/10010288777

The credit risk premium in a disaster-prone world

Zhu, Yanhui; Copeland, Laurence - 2008

The seminal Barro (2006) closed-economy model of the equity risk premium in the presence of extreme events (disasters … Barro (2006) and Barro and Ursua (2008), that the model can generate values of the riskless rate, equity risk premium and … credit risk spread broadly consistent with those typically observed in the data. …

Persistent link: https://www.econbiz.de/10010288780

General equilibrium with monopolistic firms and occasionally binding cash-in-advance constraints

Dixon, Huw; Pourpourides, Panayiotis M. - 2010

We show a simple way to introduce monopolistic competition in a general equilibrium model where prices are fully .exible, the velocity of money is variable and cash-in-advance (CIA) constraints occasionally bind.We establish the conditions under which money has real effects and demonstrate that...

Persistent link: https://www.econbiz.de/10010288784

Inflation, human capital and Tobin's q

Basu, Parantap; Gillman, Max; Pearlman, Joseph - 2009

A pervasive empirical finding for the US economy is that inflation is negatively correlated with the normalized market price of capital (Tobin's q) and growth. A dynamic stochastic general equilibrium model of endogenous growth is developed to explain these stylized facts. In this model, human...

Persistent link: https://www.econbiz.de/10010288787

A correction function approach to solve the incidental parameter problem

Li, Guangjie; Leon-Gonzalez, Roberto - 2009

Following Lancaster (2002), we propose a strategy to solve the incidental parameter problem. The method is demonstrated under a simple panel Poisson count model. We also extend the strategy to accomodate cases when information orthogonality is unavailable, such as the linear AR(p) panel model....

Persistent link: https://www.econbiz.de/10010288792

Two orthogonal continents: Testing a two-country DSGE model of the US and the EU using indirect inference

Meenagh, David; Meenagh, David; Minford, Patrick; … - 2009

We examine a two country model of the EU and the US. Each has a small sector of the labour and product markets in which there is wage/price rigidity, but otherwise enjoys flexible wages and prices with a one quarter information lag. Using a VAR to represent the data, we find the model as a whole...

Persistent link: https://www.econbiz.de/10010288793

Monetary aggregates, financial intermediate and the business cycle

Hong, Hao - 2011

This paper explains and evaluates the transmissions and effectiveness of monetary policy shock in a simple Cash-in-Advance (CIA) economy with financial intermediates. Lucas-Fuerst's (1992) limited participation CIA models are able to explain decreasing nominal interest rates and increasing real...

Persistent link: https://www.econbiz.de/10010288795

Fiscal policy multipliers in a new Keynesian model under positive and zero nominal interest rate

Kaszab, Lorant - 2011

This paper uses a simple new-Keynesian model (with and without capital) and calculates multipliers of four types. That is, we assume either an increase in government spending or a cut in sales/labor/capital tax that is financed by lump-sum taxes (Ricardian evidence holds). We argue that...

Persistent link: https://www.econbiz.de/10010288797

Generalized Taylor and generalized Calvo price and wagesetting: Micro evidence with macro implications

Dixon, Huw; Le Bihan, Hervé - 2011

The Generalized Calvo and the Generalized Taylor models of price and wage-setting are, unlike the standard Calvo and Taylor counter-parts, exactly consistent with the distribution of durations observed in the data. Using price and wage micro-data from a major euro-area economy (France), we...

Persistent link: https://www.econbiz.de/10010288804

Can the learnability criterion ensure determinacy in New Keynesian models?

Minford, Patrick; Srinivasan, Naveen - 2012

Forward-looking RE models such as the popular New Keynesian (NK) model do not provide a unique prediction about how the model economy behaves. We need some mechanism that ensures determinacy. McCallum (2011) says it is not needed because models are learnable only with the determinate solution...

Persistent link: https://www.econbiz.de/10010288805