1,721,038 research outputs found
Asymmetries in Monetary Policy
Full text linkNonlinearities embedded in the standard New-Keynesian model show that a welfare maximizing policymaker should behave in line with a contractionary bias, fearing more expansions in output and inflation rather than contractions. On the contrary, the aggregate-supply equation implies that any upward pressure coming from real marginal costs does not necessarily push up inflation. Once these two forces are combined in the optimal policy, an overall expansionary bias emerges. The nonlinearities of the AS equation combined with changes in volatility can be responsible for a flattening in the estimated linear Phillips curve
Monetary Policy and Automatic Stabilizers, the Role of Progressive Taxation
Full text linkWe study the effects of progressive labor income taxation in an
otherwise standard NK model. We show that progressive taxation
(i) introduces a trade-o¤ between output and inflation stabilization
and affects the slope of the Phillips Curve; (ii) acts as automatic
stabilizer changing the responses to technology shocks and demand shocks (iii) alters the prescription for the optimal monetary policy.
The welfare gains from commitment decrease as labor income taxes become more progressive. Quantitatively, the model reproduces the observed negative correlation between the volatility of output, hours and inflation and
the degree of progressivity of labor income taxation
Optimal Monetary Policy in Economies with Dual Labor Markets
Full text linkWe present a DSGE New Keynesian model with indivisible labor and a dual labor market: a walrasian one where wages are fully flexible and a unionized one charaterized by real wage rigidity. We show that the negative e¤ect of a productivity shock on inflation and the positive effect of a cost-push shock are crucially determined by the proportion of firms that belong to the unionized sector. The larger this number, the larger are these effects.
Consequently, the larger the union coverage, the larger should be the optimal response of the nominal interest rate to exogenous
productivity and cost-push shocks. The optimal inflation and output gap volatility increases as the number of the unionized firms in the economy increases.
Impact Factor: 0.885
5-Year Impact Factor: 1.18
FIRMS’ ENDOGENOUS ENTRY AND MONOPOLISTIC BANKING IN A DSGE MODEL
Full text linkWe consider a DSGE model with monopolistically competitive banks together with Q1
endogenous firms’ entry. We find that our model implies higher volatilities of both real
and financial variables than those implied by a DSGE model with a monopolistic banking
sector and a fixed number of firms. The response of the economic activity is also more
persistent in response to all shocks. Furthermore, we show that inefficient banks enhance
the endogenous propagation of the shocks with respect to a model where banks compete
under perfect competition and can fully ensure against the risk of firms’ default
Heterogeneous Consumers, Demand Regimes, Monetary Policy Efficacy and Determinacy
No full textThis paper investigates the effects of monetary policy in presence of heterogeneous consumers. We study the effectiveness (quantitative effects) of monetary policy and equilibrium determinacy properties of a New Keynesian DSGE model where a fraction of households cannot smooth consumption. We show that two-demand regimes can emerge (according to the “slope” of IS curve) and that the main unconventional results, stressed by recent literature, only hold in the unconventional case of an IS curve positively sloped
Endogenous Market Structures and Labor Market Dynamics
Full text linkWe propose a flexible prices model where endogenous market structures and search and matching frictions in the labor market interact endogenously. The interplay between firms endogenous entry, strategic interactions among producers and labor market frictions represents a strong amplification channel of technology shocks on labor market variables, and helps addressing the unemployment-volatility puzzle. Consistently with U.S. evidence, new firms create a large fraction of new jobs and grow faster than more mature firms, net firms' entry is procyclical and the price mark up is countercyclical
Firm Entry, Endogenous Markups and the Dynamics of the Labor Share
Full text linkRecent U.S. evidence suggests that the response of the labor share to a productivity shock is characterized by countercyclicality and overshooting. These findings cannot be easily reconciled with existing business cycle models. We extend the standard model of search and matching in the labor market by considering strategic interactions among an endogenous number of producers. This leads to countercyclical price markups. While Nash bargaining is sufficient to capture the labor share countercyclicality, we show that countercyclical markups are key to address the overshooting
- …
