This paper builds a theory of macroprudential policy whose only friction is nominal rigidity in goods and labor markets, possibly combined with a constraint on monetary policy such as the zero lower …
PublishedClassicJournal of the European Economic AssociationPublished Sep 2003
A sticky-price, sticky-wage dynamic general equilibrium model of the euro area, with habit formation, investment adjustment costs and variable capacity utilisation, is estimated by Bayesian methods on …
PublishedClassicReview of Economic StudiesOnline 1 Jul 2002Published Jul 2002
Chari, Kehoe, and McGrattan build a calibrated two-country sticky-price model with price-discriminating, staggered-price monopolists and find it can generate exchange-rate volatility and persistence …
Velde asks what happens to prices, wages, and output when the nominal money supply is cut literally overnight, and finds a real-world natural experiment in 1720s France, where the government …
This 2000 American Economic Review paper by Philippe Bacchetta and Eric van Wincoop builds a one-period, two-country monetary general-equilibrium model to ask whether exchange-rate stability really …
This 1995 Journal of Political Economy paper by Maurice Obstfeld and Kenneth Rogoff builds the foundational "Redux" two-country dynamic general-equilibrium model that bridges the intertemporal …
Estimated New Keynesian models reconcile inertial inflation with Calvo pricing only by forcing firms to re-optimise prices once every two years or more, which micro price data contradict. Making …
Standard optimising consumption models make spending jump on impact when a shock hits, which the data flatly contradict; replacing time-separable utility with habit formation gives consumers a motive …
This paper extends the "certainty equivalence" shortcut that makes first-order sequence-space methods fast for heterogeneous-agent models to second and third order, showing that these higher-order …
A New Keynesian model is extended with hiring costs that rise in labour market tightness and with real wage rigidity, so that unemployment exists and moves. Under the paper's utility specification the …
This paper argues, using data from five large devaluation episodes (Argentina 2001, Brazil 1999, Korea 1997, Mexico 1994, Thailand 1997), that the large post-devaluation fall in the real exchange rate …
This 2003 Review of Economic Studies paper by Michael Devereux and Charles Engel builds a welfare-based, two-country stochastic sticky-price model -- extending Obstfeld and Rogoff (1995, 1998) -- to …
This 2005 Journal of Political Economy paper by Christiano, Eichenbaum, and Evans (CEE) builds and estimates a general-equilibrium model to answer a specific question: what combination of frictions …
Studying optimal Ramsey fiscal and monetary policy in a sticky-price production economy where the government can tax only distortingly and can issue only nominal, non-state-contingent bonds, …
In an optimizing-agent model where both wages and prices are set in staggered Calvo contracts, monetary policy cannot reach the allocation that would prevail under fully flexible wages and prices, …
This 1990 *Review of Economic Studies* paper (circulated as NBER Working Paper 2476, December 1987) asks why nominal shocks like changes in the money supply appear to have large real effects, given …
PublishedClassicJournal of Money, Credit and BankingPublished Jan 2007
The standard New Keynesian model implies that stabilising inflation also stabilises the welfare-relevant output gap -- a property the authors name the "divine coincidence" and trace to the absence of …
Letting a fraction of consumers and price setters replace optimisation with a backward-looking rule of thumb adds endogenous persistence to output and inflation, changes how shocks travel through a …
A New Neoclassical Synthesis model of the US economy with seven structural shocks and a full set of real and nominal frictions is estimated on seven quarterly series by Bayesian methods, and shown to …
Using unpublished BLS microdata behind the CPI for 1995-1997 -- about 350 categories covering roughly 70% of consumer spending -- Bils and Klenow find that individual retail prices change much more …
This 1983 Journal of Monetary Economics paper by Guillermo Calvo builds a model of staggered price-setting that is more analytically tractable than the earlier discrete-contract-length models of …
Staggered price-setting was long hoped to turn a short spell of exogenous price stickiness into a long spell of endogenous stickiness, and so into persistent output movements after a monetary shock. …
By replacing the cross-sectional distribution with low-dimensional current prices as the state variable and letting agents learn equilibrium price dynamics from simulated paths -- while still …
PublishedClassicFederal Reserve Bank of Richmond Economic QuarterlyPublished Jul 2000
King gives a simple exposition of the "New IS-LM model" -- a three-equation system of a forward-looking IS curve, a Fisher equation, and a New Keynesian (expectational) Phillips curve, each derivable …
PublishedClassicJournal of International EconomicsPublished Aug 2001
An interim survey of the dynamic general equilibrium open-economy literature that grew out of Obstfeld and Rogoff's 1995 Redux model, organised around the question of which of its assumptions its …
PublishedClassicJournal of Money, Credit and BankingPublished Nov 1995
This 1995 *Journal of Money, Credit and Banking* paper (circulated as NBER Working Paper 5046, February 1995) builds what the author calls a "Neomonetarist" model -- a hybrid that keeps a Real …
PublishedClassicJournal of Economic LiteraturePublished Dec 1999
This widely cited survey derives monetary policy design from a simple forward-looking New Keynesian model, showing that optimal policy without commitment requires raising the nominal rate more than …