Policy trade-off in the long run: A new Keynesian model with technological change and money growth
AbstractIn this study, we introduce a constant rate of technological change and money growth into the standard new Keynesian model, in which both prices and nominal wages are supposed to be sticky. Using such a model, we examine whether a policy trade-off exists between curbing inflation and stabilizing the welfare-relevant output gap in the steady state. If we take only price stickiness into consideration, a policy trade-off does not occur. However, if both nominal wage stickiness and price stickiness are taken into consideration, a policy trade-off occurs.
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Bibliographic InfoArticle provided by Elsevier in its journal Economic Modelling.
Volume (Year): 27 (2010)
Issue (Month): 5 (September)
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Web page: http://www.elsevier.com/locate/inca/30411
Nominal rigidities Welfare-relevant output gap New Keynesian Phillips curve;
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