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Optimal Price Indices for Targeting Inflation Under Incomplete Markets

Anand, Rahul - 2010

In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. In this paper, we develop a two-sector two-good closed economy new Keynesian model to study the optimal choice of price index in markets with...

Persistent link: https://www.econbiz.de/10013139035

Labor Turnover Costs, Workers' Heterogeneity, and Optimal Monetary Policy

Faia, Ester - 2009

We study the design of optimal monetary policy in a New Keynesian model with labor turnover costs in which wages are set according to a right to manage bargaining where the firms' counterpart is given by currently employed workers. Our model captures well the salient features of European labor...

Persistent link: https://www.econbiz.de/10013157529

Monetary Persistence, Imperfect Competition, and Staggering Complementarities

Merkl, Christian; Snower, Dennis J. - 2021

This paper explores the influence of wage and price staggering on monetary persistence. We show that, for plausible parameter values, wage and price staggering are complementary in generating monetary persistence. We do so by proposing the new measure of quantitative inertia, after discussing...

Persistent link: https://www.econbiz.de/10013316832

What Measure of Inflation Should a Developing Country Central Bank Target?

Anand, Rahul - 2015

In closed or open economy models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. We analyze this result in the context of developing economies, where a large proportion of households are credit constrained...

Persistent link: https://www.econbiz.de/10013016274

A Theory of Price Adjustment Under Loss Aversion

Ahrens, Steffen - 2014

We present a new partial equilibrium theory of price adjustment, based on consumer loss aversion. In line with prospect … theory, the consumers' perceived utility losses from price increases are weighted more heavily than the perceived utility … an otherwise standard dynamic neoclassical model of monopolistic competition.The resulting theory of price adjustment is …

Persistent link: https://www.econbiz.de/10013054582

Sequential Bargaining in a New-Keynesian Model with Frictional Unemployment and Staggered Wage Negotiation

De Walque, Gregory - 2009

We consider a model with frictional unemployment and staggered wage bargaining where hours worked are negotiated every period. The workers' bargaining power in the hours negotiation affects both unemployment volatility and inflation persistence. The closer to zero this parameter, (i) the more...

Persistent link: https://www.econbiz.de/10012764242

Inflation Persistence and the Phillips Curve Revisited

Karanassou, Marika - 2007

A major criticism against staggered nominal contracts is that they give rise to the so called persistency puzzle - although they generate price inertia, they cannot account for the stylised fact of inflation persistence. It is thus commonly asserted that, in the context of the new Phillips curve...

Persistent link: https://www.econbiz.de/10012777470

Asymmetric Labor Market Institutions in the Emu and the Volatility of Inflation and Unemployment Differentials

Abbritti, Mirko - 2012

How does the asymmetry of labor market institutions affect the adjustment of a currency union to shocks? To answer this question, this paper sets up a dynamic currency union model with monopolistic competition and sticky prices, hiring frictions and real wage rigidities. In our analysis, we...

Persistent link: https://www.econbiz.de/10013107467

Monetary Policy and Inequality Under Labor Market Frictions and Capital-Skill Complementarity

Dolado, Juan J. - 2018

In order to improve our understanding of the channels through which monetary policy has distributional consequences, we build a New Keynesian model with incomplete asset markets, asymmetric search and matching (SAM) frictions across skilled and unskilled workers and, foremost, capital-skill...

Persistent link: https://www.econbiz.de/10012919514

Causal Effects of Monetary Shocks : Semiparametric Conditional Independence Tests with a Multinomial Propensity Score

Angrist, Joshua D.; Kuersteiner, Guido M. - 2021

Macroeconomists have long been concerned with the causal effects of monetary policy. When the identification of causal effects is based on a selection-on-observables assumption, non-causality amounts to the conditional independence of outcomes and policy changes. This paper develops a...

Persistent link: https://www.econbiz.de/10013325071