Marcus Hagedorn
- 31 March 2008
- WORKING PAPER SERIES - No. 878Details
- Abstract
- Central bankers' conventional wisdom suggests that nominal interest rates should be raised to implement a lower inflation target. In contrast, I show that the standard New Keynesian monetary model predicts that nominal interest rates should be decreased to attain this goal. Real interest rates, however, are virtually unchanged. These results also hold in recent vintages of New Keynesian models with sticky wages, price and wage indexation and habit formation in consumption.
- JEL Code
- E41 : Macroeconomics and Monetary Economics→Money and Interest Rates→Demand for Money
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
- 25 January 2008
- WORKING PAPER SERIES - No. 853Details
- Abstract
- Recently, a number of authors have argued that the standard search model cannot generate the observed business-cycle-frequency fluctuations in unemployment and job vacancies, given shocks of a plausible magnitude. We use data on the cost of vacancy creation and cyclicality of wages to identify the two key parameters of the model - the value of non-market activity and the bargaining weights. Our calibration implies that the model is, in fact, consistent with the data.
- JEL Code
- E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
J41 : Labor and Demographic Economics→Particular Labor Markets→Labor Contracts
J63 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→Turnover, Vacancies, Layoffs
J64 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→Unemployment: Models, Duration, Incidence, and Job Search