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Recent studies on shifting trend inflation use the Standard New Keynesian model with Calvo price settingto address welfare issues. Within this framework, the transmission mechanism gets mainly through pricedispersion as an inefficient source of distortion in the output. As a result, firms have...
Persistent link: https://www.econbiz.de/10013305858
The existing literature on shifting trend inflation has, for the most part, focused on the Calvo staggered nominal contracts to address welfare issues. This paper proposes alternative nominal contracts in the form of Taylor in a fully specified medium small-scale New Keynesian Model featuring...
Persistent link: https://www.econbiz.de/10013307582
This paper analyzes the welfare costs related to changes in monetary policy and trend inflation in the Postwar U.S. economy. We use a medium-scale New Keynesian DSGE model and find the following results. First, changes in monetary policy and trend inflation play an essential role in reducing...
Persistent link: https://www.econbiz.de/10013307583