| Data: |
2018 |
| Resum: |
In this paper we present a generalized sticky price model which allows, depending on the parameterization, for demand shocks to maintain strong expansionary effects even in the presence of perfectly flexible prices. The model is constructed to incorporate the standard threeequation New Keynesian model as a special case. We refer to the parameterizations where demand shocks have expansionary effects regardless of the degree of price stickiness as Real Keynesian parameterizations. We use the model to show how the effects of monetary policy - for the same degree of price stickiness - differ depending whether the model parameters are within the Real Keynesian subset or not. In particular, we show that in the Real Keynesian subset, the effect of a monetary policy that tries to counter demand shocks creates the opposite trade-off between inflation and output variability than under more traditional parameterizations. Moreover, we show that under the Real Keynesian parameterization neo-Fisherian effects emerge even though the equilibrium remains unique. We then estimate our extended sticky price model on U. S. data to see whether estimated parameters tend to fall within the Real Keynesian subset or whether they are more in line with the parameterization generally assumed in the New Keynesian literature. In passage, we use the model to justify a new SVAR procedure that offers a simple presentation of the data features which help identify the key parameters of the model. The main finding from our multiple estimations, and many robustness checks is that the data point to model parameters that fall within the Real Keynesian subset as opposed to a New Keynesian subset. We discuss both (i) how a Real Keynesian parametrization offers an explanation to puzzles associated with joint behaviour of inflation and employment during the zero lower bound period and during the Great Moderation period, (ii) how it potentially changes the challenge faced by monetary policy if authorities want to achieve price stability and favour employment stability. |
| Resum: |
The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396. |
| Ajuts: |
European Commission 649396
|
| Drets: |
Aquest document està subjecte a una llicència d'ús Creative Commons. Es permet la reproducció total o parcial, la distribució, la comunicació pública de l'obra i la creació d'obres derivades, fins i tot amb finalitats comercials, sempre i quan es reconegui l'autoria de l'obra original.  |
| Llengua: |
Anglès |
| Col·lecció: |
Barcelona Graduate School of Economics. ADEMU working paper series |
| Col·lecció: |
ADEMU Working Paper Series ; 91 |
| Document: |
Working paper |
| Matèria: |
Monetary policy ;
Business cycle |
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