Endogenous Growth Downward Wage Rigidities And Optimal Inflation PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Endogenous Growth Downward Wage Rigidities And Optimal Inflation PDF full book. Access full book title Endogenous Growth Downward Wage Rigidities And Optimal Inflation.
Author | : Mirko Abbritti |
Publisher | : International Monetary Fund |
Total Pages | : 49 |
Release | : 2021-08-06 |
Genre | : Business & Economics |
ISBN | : 1513583980 |
Download Endogenous Growth, Downward Wage Rigidities and Optimal Inflation Book in PDF, ePub and Kindle
Standard New Keynesian (NK) models feature an optimal inflation target well below two percent, limited welfare losses from business cycle fluctuations and long-term monetary neutrality. We develop a NK framework with labour market frictions, endogenous productivity and downward wage rigidity (DWR) which challenges these results. The model features a non-vertical long-run Phillips curve between inflation and unemployment and a trade-off between price distortions and output hysteresis that change the welfare-maximizing inflation level. For a plausible set of parameters, the optimal inflation target is in excess of two percent, a target value commonly used across central banks. Deviations from the optimal target carry welfare costs multiple times higher than in traditional NK models. The main reason is that endogenous growth and DWR generate asymmetric and hysteresis effects on unemployment and output. Price level targeting or a Taylor-rule responding to the unemployment rate can handle better the asymmetric and hysteresis effects in our model and deliver significant welfare gains. Our results are robust to the inclusion of the effective lower bound on the monetary policy interest rate.
Author | : |
Publisher | : |
Total Pages | : |
Release | : 2021 |
Genre | : |
ISBN | : 9789289949682 |
Download Endogenous Growth, Downward Wage Rigidity and Optimal Inflation Book in PDF, ePub and Kindle
Standard New Keynesian (NK) models feature an optimal inflation target well below two percent, limited welfare losses from business cycle fluctuations and long-term monetary neutrality. We develop a NK framework with labour market frictions, endogenous productivity and downward wage rigidity (DWR) which challenges these results. The model features a non-vertical long-run Phillips curve between inflation and unemployment and a trade-off between price distortions and output hysteresis that change the welfare-maximizing inflation level. For a plausible set of parameters, the optimal inflation target is in excess of two percent, a target value commonly used across central banks. Deviations from the optimal target carry welfare costs multiple times higher than in traditional NK models. The main reason is that endogenous growth and DWR generate asymmetric and hysteresis effects on unemployment and output. Price level targeting or a Taylor-rule responding to the unemployment rate can handle better the asymmetric and hysteresis effects in our model and deliver significant welfare gains. Our results are robust to the inclusion of the effective lower bound on the monetary policy interest rate.
Author | : Pierpaolo Benigno |
Publisher | : International Monetary Fund |
Total Pages | : 48 |
Release | : 2009-03-01 |
Genre | : Business & Economics |
ISBN | : 1451871813 |
Download The Inflation-Unemployment Trade-off at Low Inflation Book in PDF, ePub and Kindle
Wage setters take into account the future consequences of their current wage choices in the presence of downward nominal wage rigidities. Several interesting implications arise. First, a closed-form solution for a long-run Phillips curve relates average unemployment to average wage inflation; the curve is virtually vertical for high inflation rates but becomes flatter as inflation declines. Second, macroeconomic volatility shifts the Phillips curve outward, implying that stabilization policies can play an important role in shaping the trade-off. Third, nominal wages tend to be endogenously rigid also upward, at low inflation. Fourth, when inflation decreases, volatility of unemployment increases whereas the volatility of inflation decreases: this implies a long-run trade-off also between the volatility of unemployment and that of wage inflation.
Author | : Gabriel Fagan |
Publisher | : |
Total Pages | : |
Release | : 2009 |
Genre | : |
ISBN | : |
Download Downward wage rigidity and optimal steady-state inflation Book in PDF, ePub and Kindle
Author | : Pierpaolo Benigno |
Publisher | : |
Total Pages | : 38 |
Release | : 2010 |
Genre | : Wages |
ISBN | : |
Download The Inflation-output Trade-off with Downward Wage Rigidities Book in PDF, ePub and Kindle
In the presence of downward nominal wage rigidities, wage setters take into account the future consequences of their current wage choices, when facing both idiosyncratic and aggregate shocks. We derive a closed-form solution for a long-run Phillips curve which relates average output gap to average wage inflation: it is virtually vertical at high inflation and flattens at low inflation. Macroeconomic volatility shifts the curve outward and reduces output. The results imply that stabilization policies play an important role, and that optimal inflation may be positive and differ across countries with different macroeconomic volatility.
Author | : Niloufar Entekhabi |
Publisher | : |
Total Pages | : 0 |
Release | : 2008 |
Genre | : |
ISBN | : |
Download Technical Change, Wage and Price Dispersion, and the Optimal Rate of Inflation Book in PDF, ePub and Kindle
This paper brings the elements of growth to the standard New Keynesian model to analyze the optimal rate of inflation. To our knowledge, this is the first theoretical attempt to consider the effects of growth in the determination of optimal monetary policies. With both elements of price and wage rigidities, inflation creates distortions due to wage and price dispersions and due to its effects on monopolistic mark-ups by price and wage setters. The choice of the optimal inflation rate balances these distortions at the margin. The paper first characterizes these tradeoffs in the steady-state version of the model and finds that, for a wide range of parameter values, the optimal rate of inflation is negative. When the monetary policy is committed to adjust nominal interest rates to ensure its objective of price stability, it might target a deflation rate. This is due to the fact that the mean of inflation is affected by shocks, and on average, this mean is approaching zero. The welfare analysis then reveals that real growth decreases the welfare cost of inflation.
Author | : Dany Brouillette |
Publisher | : |
Total Pages | : 13 |
Release | : 2017 |
Genre | : Inflation targeting |
ISBN | : |
Download Downward Nominal Wage Rigidity, Inflation and Unemployment Book in PDF, ePub and Kindle
"Recent evidence suggests that the extent of downward nominal wage rigidity (DNWR) inthe Canadian labour market has risen following the 2008-09 recession. This note studies whether DNWR can lead to a long‐run trade‐off between inflation and unemployment, especially at lower rates of inflation-a question that has important implications for the optimal level of inflation in the long run. The results suggest that the trade‐off between unemployment and inflation remains weak despite the estimated increase in DNWR. In particular, the long‐run Phillips curve is close to vertical at inflation rates of 2 per cent or more, in line with earlier findings. As a result, an increase in long‐term inflation from 2 to 3 per cent would lower unemployment by about 0.1-0.2 percentage points. Overall, our results suggest that the benefits of raising the inflation target to attain a lower long‐term unemployment level seem rather weak"--Abstract, p. iii.
Author | : Ms.Valerie Cerra |
Publisher | : International Monetary Fund |
Total Pages | : 50 |
Release | : 2020-05-29 |
Genre | : Business & Economics |
ISBN | : 1513536990 |
Download Hysteresis and Business Cycles Book in PDF, ePub and Kindle
Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as “hysteresis,” argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and theoretical literature that motivate this paradigm shift. The renewed interest in hysteresis has been sparked by the persistence of the Global Financial Crisis and fears of a slow recovery from the Covid-19 crisis. The findings of the recent literature have far-reaching conceptual and policy implications. In recessions, monetary and fiscal policies need to be more active to avoid the permanent scars of a downturn. And in good times, running a high-pressure economy could have permanent positive effects.
Author | : United States. Congress. Senate. Advisory Commission to Study the Consumer Price Index |
Publisher | : |
Total Pages | : 212 |
Release | : 1996 |
Genre | : Consumer price indexes |
ISBN | : |
Download Toward a More Accurate Measure of the Cost of Living Book in PDF, ePub and Kindle
Author | : Ben S. Bernanke |
Publisher | : University of Chicago Press |
Total Pages | : 469 |
Release | : 2007-11-01 |
Genre | : Business & Economics |
ISBN | : 0226044734 |
Download The Inflation-Targeting Debate Book in PDF, ePub and Kindle
Over the past fifteen years, a significant number of industrialized and middle-income countries have adopted inflation targeting as a framework for monetary policymaking. As the name suggests, in such inflation-targeting regimes, the central bank is responsible for achieving a publicly announced target for the inflation rate. While the objective of controlling inflation enjoys wide support among both academic experts and policymakers, and while the countries that have followed this model have generally experienced good macroeconomic outcomes, many important questions about inflation targeting remain. In Inflation Targeting, a distinguished group of contributors explores the many underexamined dimensions of inflation targeting—its potential, its successes, and its limitations—from both a theoretical and an empirical standpoint, and for both developed and emerging economies. The volume opens with a discussion of the optimal formulation of inflation-targeting policy and continues with a debate about the desirability of such a model for the United States. The concluding chapters discuss the special problems of inflation targeting in emerging markets, including the Czech Republic, Poland, and Hungary.