This paper analyzes the period-to-period changes that occur in an optimizing monetary model with uncertainty and sticky prices. Money is incorporate in its role as a medium of exchange through a time-cost transactions techonolgy. Another important characteristic of the model is that both capital...

Following Erceg et al. (2000), sticky wages are generally modelled assuming that households set wage contracts à la Calvo (1983). This paper compares that sticky-wage model with one where wage contracts are set by firms, assuming flexible prices in any case. The key variable for wage dynamics...

Structural models are a powerful tool for business cycle and monetary policy analysis because they are invariant to either policy changes or external shocks. In this paper, we derive a Sidrauski-type model in which both the demand and supply side are structural in the sense that the behavioral...

One of the most significant characteristics of optimizing models is that the behavioral equations involved are typically forward looking, i.e. agents are concerned about the futures rather than the past. This creates difficulties when modelling some of the business-cycle patterns widely observed...

This paper examines how price setting plays a key role in explaining the steady-state effects of inflation in a monopolistic competition economy with transactions-facilitating money. Three pricing variants (optimal prices, indexed prices, and unchanged prices) are introduced through a...

This paper shows a New Keynesian model where wages are set at the value that matches household´s labor supply with firm´s labor demand. Subsequently, wage stickiness brings industry-level unemployment fluctuations. After aggregation, the rate of wage in?ation is negatively related to...

Employment fluctuations are examined, at different levels of aggregation, in a model with firm-specific hiring decisions due to search frictions and sticky pricing. The results indicate that firm-level employment dispersion rises with higher price stickiness and higher demand elasticity, whereas...

This paper analyses the consequences of the existence of financial frictions and of a banking system on business cycles, in a new Keynesian macroeconomics model. We contrast our conclusions with those obtained in two other existing frameworks (namely the canonical nns model of Woodford, [2003]...

Revisions of US macroeconomic data are not white-noise. They are persistent, correlated with real-time data, and with high variability (around 80% of volatility observed in US real-time data). Their business cycle effects are examined in an estimated DSGE model extended with both real-time and...

Wage stickiness is incorporated to a New-Keynesian model with variable capital to drive endogenous unemployment uctuations de ned as the log di¤erence between aggregate labor supply and aggregate labor demand. We estimated such model using Bayesian econometric techniques and quarterly U.S....