Erceg et al. (J Monet Econ 46:281313, 2000) 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 a Bayesian econometric approach, bothmodels are estimated...

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...

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

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...

The relationship between inventory investment and the real interest rate has been difficult to assess empirically. Recent work has proposed a linear-quadratic inventory model with time-varying discount factor to identify the effects of real interest rate on inventory investment. The authors show...

The relationship between inventory investment and the real interest rate has been difficult to assess empirically. Recent work has proposed a linear-quadratic inventory model with time-varying discount factor to identify the effects of the real interest rate on inventory investment. The authors...

Indeterminacy in new Keynesian models with Calvo-contracts can occur even at low trend inflation levels of 2 or 3%. The interaction of trend inflation with nominal wage rigidity and trend growth in output causes large distortions in the steady state and expands the indeterminacy region....