Why is GDP so much more volatile in poor countries than in rich ones? To answer this question, we propose a theory of …

Why is GDP so much more volatile in poor countries than in rich ones? To answer this question, we propose a theory of …

the Taylor rule is beneficial if the central bank aims at optimally stabilizing inflation and output gap variability under … discretion. Placing a weight on deviations from a simple Taylor rule increases the overall relative weight of inflation …

We use a simple New Keynesian model, with firm specific capital, non-zero steady-state inflation, long-run risks and … rate by 150 basis points causes output and inflation volatility to rise around 10% above their steady-state standard … deviations from the policy rule and the results are re-enforced by the presence of non-zero trend inflation. …

and real wage rigidities. In our analysis, we focus on the differentials in inflation and unemployment between countries … inflation and unemployment differentials. Second, we find that asymmetries in labor market structures tend to increase the … volatility of both inflation and unemployment differentials. Finally, we show that it is important to take into account the …