Erceg, Henderson and Levin (2000, Journal of Monetary Economics) introduce sticky wages in a New-Keynesian general-equilibrium model. Alternatively, it is shown here how wage stickiness may bring unemployment fluctuations into a New-Keynesian model. Using Bayesian econometric techniques, both...

This paper empirically studies the dynamic relationship between monetary and fiscal policies by analyzing the comovements between the Fed funds rate and the primary deficit/output ratio. Simple economic thinking establishes that a negative correlation between Fed rate and deficit arises whenever...

We extend Ruge-Murcia (2003, 2004) to weigh inflation and output and show that empirical evidence supports an asymmetric preference hypothesis for output. We also find evidence that the monetary authority targets potential output in parallel to Barro and Gordon (1983).

Wage stickiness is incorporated to a New-Keynesian model with variable capital to drive endogenous unemployment fluctuations defined as the log difference between aggregate labor supply and aggregate labor demand. We estimated such model using Bayesian econometric techniques and quarterly US...

This paper analyzes the performance of alternative versions of the new Keynesian monetary (NKM) model in replicating the comovement observed between output and inflation. Following Den Haan [2000. The comovement between output and prices. Journal of Monetary Economics 46, 3-30], we analyze...

Farmer (1991) suggests that in a model in which there are multiple rational expectations (RE) equilibria agents may find it useful to coordinate their expectations in a unique RE equilibrium which is immune to the Lucas Critique. In this paper, we evaluate Lucas proof (LP) equilibrium...

Wage stickiness is incorporated to a New-Keynesian model with variable capital in a way that generates endogenous unemployment fluctuations as the log difference between aggregate labor supply and aggregate labor demand. After estimation with U.S. data, the implied second-moment statistics of...

Erceg, Henderson and Levin (2000, Journal of Monetary Economics) introduce sticky wages in a New-Keynesian general-equilibrium model. Alternatively, it is shown here how wage stickiness may bring unemployment fluctuations into a New-Keynesian model. Using Bayesian econometric techniques, both...

This paper provides a new growth model by considering strategic behaviour in the supply of labour. Workers form a labour union with the aim of manipulating wages for their own benefit. We analyse the implications on labour market dynamics at business cycle frequencies of getting away from the...