Adding variable capital utilisation to a dynamic new Keynesian (DNK) framework gives a model which can produce realistic responses to both technology and monetary shocks. This requires the assumption of a much lower level of nominal rigidity than is usual

After many years, many critiques, and many variations, the staggered wage and price setting model is still the most common method of incorporating nominal rigidities into empirical macroeconomic models used for policy analysis. The aim of this chapter is to examine and reassess the staggered...