Download or read book Inflation Dynamics with Search Frictions written by Michael Krause and published by . This book was released on 2008 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: The New Keynesian Phillips curve explains inflation dynamics as being driven by current and expected future real marginal costs. In competitive labor markets, the labor share can serve as a proxy for the latter. In this paper, we study the role of real marginal cost components implied by search frictions in the labor market. We construct a measure of real marginal costs by using newly available labor market data on worker finding rates. Over the business cycle, the measure is highly correlated with the labor share. Estimates of the Phillips curve using GMM reveal that the marginal cost measure remains significant, and that inflation dynamics are mainly driven by the foward-looking component. Bayesian estimation of the full New Keynesian model with search frictions help us disentangle which shocks are driving the economy to generate the observed unit labor cost dynamics. We find that mark-up shocks are the dominant force in labor market fluctuations.

Download or read book The Role of Search Frictions and Bargaining for Inflation Dynamics written by and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Search Frictions Real Rigidities and Inflation Dynamics written by Carlos Thomas Borao and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: I analyze the effect of search frictions on inflation dynamics, in a New Keynesian model where firms make both pricing and vacancy posting decisions. I find that search frictions create real rigidities in price setting. This mechanism flattens the New Keynesian Phillips curve, relative both to the standard model with a frictionless labor market and a model where pricing and vacancy posting decisions are made by different subsets of firms. This helps the model improve its empirical performance along a number of dimensions. First, inflation becomes more persistent. Second, output responses to monetary shocks become larger and more persistent. Finally, unemployment becomes more volatile. [Resumen de autor]

Download or read book Search Frictions Real Rigidities and Inflation Dynamics written by Carlos Thomas and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The standard New Keynesian model suffers from the so-called .macro-micro pricing conflict: in order to match the dynamics of inflation implied by macroeconomic data, the model needs to assume an average duration of price contracts which is much longer than what is observed in micro data. Here I show how departing from the standard model's assumption of a perfectly competitive labor market can help resolve the pricing conflict. I do so by assuming search frictions in the labor market. In this framework, labor becomes firm-specific and marginal cost curves become upward-sloping. This mechanism reduces the slope of the New Keynesian Phillips curve given a frequency of price adjustment. Conversely, given an estimate of this slope, my model implies shorter price durations than the standard model. For a plausible calibration and for different slope values, my model consistently delivers price durations that are roughly half of those implied by the standard model.

Download or read book The Role of Search Frictions for Output and Inflation Dynamics a Bayesian Assessment written by Martin Menner and published by . This book was released on 2009 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Do Search Frictions Matter for Inflation Dynamics written by Michael U. Krause and published by . This book was released on 2007 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Inflation Dynamics and Labour Market Frictions written by Paul Middleditch and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The inflation equation, more commonly known as the Phillips curve, lies at the heart of modern macroeconomic modeling. This Keynesian relationship between inflation and unemployment discovered by Phillips (1958) soon became widely adopted by policymakers in the 1960's. However, its empirical shortcomings led to competing theories such as the natural rate hypothesis by Friedman (1968), who alongside Phelps (1967) and Lucas (1972), condemned its implications of money non neutrality. More recently, the specification has adapted to capture nominal inertia led by the New Keynesian school of Fisher (1977) and Taylor (1980), as an answer to the classical result of neutrality. The Phillips curve remains as a relationship of interest to capture the aggregate behaviour of the supply side in the economy, connecting the labour market and the pricing decisions of firms. This Thesis consists of three self contained works, each of which are set out within their own chapter but connected by the employment of the theoretical framework of this inflation equation. They attempt to answer three specific economic questions related to inflation dynamics and labour market frictions. The first analysis concerns itself with the labour market policy of the working hours restriction; specifically with the question of how this labour market policy affects unemployment in the long run. I find weak evidence of a fall in unemployment shortly after the announcement of this policy. Secondly, whether or not one can capture the different characteristics displayed by the labour markets of the US and EU using labour market frictions in the determination of inflation dynamics. Our findings lead us to the conclusion that it is indeed possible to capture these characteristics when analyzing a Phillips curve specified in terms of unemployment. Lastly the question of whether aggregate prices are better represented by controlling for heterogeneity. The results obtained lead us to infer that controlling for heterogeneity of this kind does indeed affect the dynamics of the macro model and does not wash out in the aggregate.

Download or read book Inflation Dynamics and the Great Recession written by Laurence M. Ball and published by International Monetary Fund. This book was released on 2011-06-01 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines inflation dynamics in the United States since 1960, with a particular focus on the Great Recession. A puzzle emerges when Phillips curves estimated over 1960-2007 are ussed to predice inflation over 2008-2010: inflation should have fallen by more than it did. We resolve this puzzle with two modifications of the Phillips curve, both suggested by theories of costly price adjustment: we measure core inflation with the median CPI inflation rate, and we allow the slope of the Phillips curve to change with the level and vairance of inflation. We then examine the hypothesis of anchored inflation expectations. We find that expectations have been fully "shock-anchored" since the 1980s, while "level anchoring" has been gradual and partial, but significant. It is not clear whether expectations are sufficiently anchored to prevent deflation over the next few years. Finally, we show that the Great Recession provides fresh evidence against the New Keynesian Phillips curve with rational expectations.

Download or read book Labor Credit and Goods Markets written by Nicolas Petrosky-Nadeau and published by MIT Press. This book was released on 2017-11-10 with total page 271 pages. Available in PDF, EPUB and Kindle. Book excerpt: An integrated framework to study the theoretical and quantitative properties of economies with frictions in labor, financial, and goods markets. This book offers an integrated framework to study the theoretical and quantitative properties of economies with frictions in multiple markets. Building on analyses of markets with frictions by 2010 Nobel laureates Peter A. Diamond, Dale T. Mortensen, and Christopher A. Pissarides, which provided a new theoretical approach to search markets, the book applies this new paradigm to labor, finance, and goods markets. It shows, in particular, how frictions in different markets interact with each other. The book first covers the main developments in the analysis of the labor market in the presence of frictions, offering a systematic analysis of the dynamics of this environment and explaining the notion of macroeconomic volatility. Then, building on the generality and simplicity of the search analysis, the book adapts it to other markets, developing the tools and concepts to analyze friction in these markets. The book goes beyond the traditional general equilibrium analysis of markets, which is often frictionless. It begins with the standard analysis of a single market, and then sequentially integrates more markets into the analysis, progressing from labor to financial to goods markets. Along the way, the book provides a number of useful results and insights, including the existence of a direct link between search frictions and the degree of volatility in the economy.

Download or read book Handbook of Monetary Economics Vols 3A 3B Set written by Benjamin M. Friedman and published by Newnes. This book was released on 1990 with total page 1729 pages. Available in PDF, EPUB and Kindle. Book excerpt: How have monetary policies matured during the last decade? The recent downturn in economies worldwide have put monetary policies in a new spotlight. In addition to their investigations of new tools, models, and assumptions, they look carefully at recent evidence on subjects as varied as price-setting, inflation persistence, the private sector's formation of inflation expectations, and the monetary policy transmission mechanism. They also reexamine standard presumptions about the rationality of asset markets and other fundamentals. Stopping short of advocating conclusions about the ideal conduct of policy, the authors focus instead on analytical methods and the changing interactions among the ingredients and properties that inform monetary models. The influences between economic performance and monetary policy regimes can be both grand and muted, and this volume clarifies the present state of this continually evolving relationship. Presents extensive coverage of monetary policy theories with an eye toward questions raised by the recent financial crisis Explores the policies and practices used in formulating and transmitting monetary policies Questions fiscal-monetary connnections and encourages new thinking about the business cycle itself Observes changes in the formulation of monetary policies over the last 25 years

Download or read book Handbook of Monetary Economics 3A written by Benjamin M. Friedman and published by Elsevier. This book was released on 2010-11-17 with total page 755 pages. Available in PDF, EPUB and Kindle. Book excerpt: How have monetary policies matured during the last decade? The recent downturn in economies worldwide have put monetary policies in a new spotlight. In addition to their investigations of new tools, models, and assumptions, they look carefully atrecent evidence on subjects as varied as price-setting, inflation persistence, the private sector's formation of inflation expectations, and the monetary policy transmission mechanism. They also reexamine standard presumptions about the rationality of asset markets and other fundamentals. Stopping short of advocating conclusions about the ideal conduct of policy, the authors focus instead on analytical methods and the changing interactions among the ingredients and properties that inform monetary models. The influences between economic performance and monetary policy regimes can be both grand and muted, and this volume clarifies the present state of this continually evolving relationship. Presents extensive coverage of monetary policy theories with an eye toward questions raised by the recent financial crisis Explores the policies and practices used in formulating and transmitting monetary policiesQuestions fiscal-monetary connections and encourages new thinking about the business cycle itself Observes changes in the formulation of monetary policies over the last 25 years.

Download or read book Search Frictions Real Rigidities and Inflation Dynamic written by Carlos Thomas and published by . This book was released on 2008 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Inflation dynamics with labour market matching assessing alternative specifications written by Kai Christoffel and published by . This book was released on 2009 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews recent approaches to modeling the labour market and assesses their implications for inflation dynamics through both their effect on marginal cost and on price-setting behavior. In a search and matching environment, we consider the following modeling setups: right-to-manage bargaining vs. efficient bargaining, wage stickiness in new and existing matches, interactions at the firm level between price and wage-setting, alternative forms of hiring frictions, search on-the-job and endogenous job separation. We find that most specifications imply too little real rigidity and, so, too volatile inflation. Models with wage stickiness and right-to-manage bargaining or with firm-specific labour emerge as the most promising candidates.

Download or read book European Inflation Dynamics written by Jordi Galí and published by . This book was released on 2001 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide evidence on the fit of the New Phillips Curve (NPQ for the Euro area over the period 1970-1998, and use it as a tool to compare the characteristics of European inflation dynamics with those observed in the U.S. We also analyze the factors underlying inflation inertia by examining the cyclical behavior of marginal costs, as well as that of its two main components, namely, labor productivity and real wages. Some of the findings can be summarized as follows: (a) the NPC fits Euro area data very well, possibly better than U.S. data, (b) the degree of price stickiness implied by the estimates is substantial, but in line with survey evidence and U.S. estimates, (c) inflation dynamics in the Euro area appear to have a stronger forward- looking component (i.e., less inertia) than in the U.S., (d) labor market frictions, as manifested in the behavior of the wage markup, appear to have played a key role in shaping the behavior of marginal costs and, consequently, inflation in Europe.

Download or read book Inflation Dynamics with Labour Market Matching written by Kai Philipp Christoffel and published by . This book was released on 2019 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews recent approaches to modeling the labour market and assesses their implications for inflation dynamics through both their effect on marginal cost and on price-setting behavior. In a search and matching environment, we consider the following modeling setups: right-to-manage bargaining vs. efficient bargaining, wage stickiness in new and existing matches, interactions at the firm level between price and wage-setting, alternative forms of hiring frictions, search on-the-job and endogenous job separation. We find that most specifications imply too little real rigidity and, so, too volatile inflation. Models with wage stickiness and right-to-manage bargaining or with firm-specific labour emerge as the most promising candidates.

Download or read book Bayesian Multivariate Time Series Methods for Empirical Macroeconomics written by Gary Koop and published by Now Publishers Inc. This book was released on 2010 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bayesian Multivariate Time Series Methods for Empirical Macroeconomics provides a survey of the Bayesian methods used in modern empirical macroeconomics. These models have been developed to address the fact that most questions of interest to empirical macroeconomists involve several variables and must be addressed using multivariate time series methods. Many different multivariate time series models have been used in macroeconomics, but Vector Autoregressive (VAR) models have been among the most popular. Bayesian Multivariate Time Series Methods for Empirical Macroeconomics reviews and extends the Bayesian literature on VARs, TVP-VARs and TVP-FAVARs with a focus on the practitioner. The authors go beyond simply defining each model, but specify how to use them in practice, discuss the advantages and disadvantages of each and offer tips on when and why each model can be used.

Download or read book Labor Markets Fiscal Policy and Inflation Dynamics written by Salem M. Abo-Zaid and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the early months of the COVID-19 pandemic, inflation fell. Later, as the pandemic wore on, inflation has risen sharply, reaching a 40-year high. To explain the dynamics of inflation, we augment the standard labor search and matching model with a shock that affects the demand side of the economy and matching in the labor market. We illustrate that the inflation rate is strongly tied to the behavior of vacancies and labor market tightness. This pattern is observed in European countries too. In addition, downward nominal wage rigidity plays a role in explaining the behavior of wage inflation and, consequently, price inflation. Fiscal policy improves the performance of the model, but it cannot sufficiently replicate the behavior of inflation to the same extent that frictions in the matching process do.