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Is forward-looking inflation targeting destabilizing? The role of policy's response to current output under endogenous investment

Huang, Kevin X. D.; Meng, Qinglai - 2007

in response solely to future inflation induce real indeterminacy of equilibrium. Applying the Samuelson … by itself has a quantitatively negligible effect and almost all strict inflation-targeting rules lead to indeterminacy … stickiness, indeterminacy is much less likely to occur as policy also responds to output. With estimated labor supply elasticity …

Persistent link: https://www.econbiz.de/10010260586

News versus sunspot shocks in a New Keynesian model

Karnizova, Lilia - In: Economics: The Open-Access, Open-Assessment E-Journal 4 (2010) 2010-19, pp. 1-27

Separately, news and sunspot shocks have been shown empirically to be determinants of changes in expectations. This … forecast errors is not unique, and the dynamics induced by news and sunspot shocks can be observationally equivalent. If …

Persistent link: https://www.econbiz.de/10010300732

Nonlinear inflation dynamics in menu cost economies

Blanco, Andrés; Boar, Corina; Jones, Callum; Midrigan, … - 2024

Existing menu cost models, when parameterized to match the micro-price data, cannot reproduce the extent to which the fraction of price changes increases with inflation. In addition, in the presence of strategic complementarities, they predict implausibly large menu costs and misallocation. We...

Persistent link: https://www.econbiz.de/10015189257

Rise and fall of Mexican Super Peso: Heterodox perspective versus orthodoxy

Montiel-Orozco, Laura Lisset - 2024

This working paper contrasts the neo-Keynesian and post-Keynesian theories of monetary policy for an open economy, highlighting the irrelevance of the orthodox theory and the explanatory capacity of heterodoxy for an emerging economy such as Mexico. It focuses on the role of the central bank and...

Persistent link: https://www.econbiz.de/10015189339

MMT and policy assignment in an open economy context: Simplicity is useful, oversimpliflflication not so much

Razmi, Arslan - 2022

Modern Monetary Theory (MMT) has recently received significant at- tention in academic and policy circles. Critics question the sustainability of MMT-prescribed approaches to fiscal and monetary policy, especially over extended periods of time, in the presence of international financial markets,...

Persistent link: https://www.econbiz.de/10013467126

Is the green transition inflationary?

Del Negro, Marco; Di Giovanni, Julian; Dogra, Keshav - 2023

We develop a two-sector New Keynesian model to analyze the inflationary effects of climate policies. Climate policies do not force a central bank to tolerate higher inflation, but may generate a tradeoff between the central bank's objectives for inflation and real activity. The presence and size...

Persistent link: https://www.econbiz.de/10014302775

Looking through supply shocks versus controlling inflation expectations: Understanding the Central Bank dilemma

Beaudry, Paul; Carter, Thomas J.; Lahiri, Amartya - 2022

Central banks in most advanced economies have reacted similarly to the increase in inflation that started in 2021. They initially looked through the rising inflation by leaving monetary policy relatively unchanged. Then, after inflation continued to increase, central banks pivoted by quickly...

Persistent link: https://www.econbiz.de/10014304188

Do multisectoral New Keynesian models match sectoral data?

Andrade, Philippe; Sheremirov, Viacheslav - 2022

We document empirical regularities of disaggregated inflation and consumption and study whether multisectoral New Keynesian models can explain them. We focus on higher moments of the inflation and consumption growth distributions as well as on the contemporaneous comovement of these two...

Persistent link: https://www.econbiz.de/10014304785

Inequality and the Zero Lower Bound

Fernández-Villaverde, Jesús; Marbet, Joël; Nuño, Galo; … - 2023

This paper studies how household inequality shapes the effects of the zero lower bound (ZLB) on nominal interest rates on aggregate dynamics. To do so, we consider a heterogeneous agent New Keynesian (HANK) model with an occasionally binding ZLB and solve for its fully nonlinear stochastic...

Persistent link: https://www.econbiz.de/10014377446

Downward price rigidities and inflationary relative demand shocks

Bonam, Dennis; Hobijn, Bart - 2024

We show that a negative relative demand shock in a sector with downwardly rigid prices, like the service sector, can generate substantial inflation. Such a shock induces an equilibrium decline in the relative price of services. If price adjustment costs are non-existent or symmetric, then this...

Persistent link: https://www.econbiz.de/10014581741