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Using Estimated Models to Assess Nominal and Real Rigidities in the United Kingdom

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  • Günes Kamber

    (Reserve Bank of New Zealand)

  • Stephen Millard

    (Bank of England and Durham Business School)

Abstract

This paper aims to contribute to our understanding of inflation dynamics in the United Kingdom by estimating two dynamic stochastic general equilibrium models and assessing the role of nominal and real rigidities within them. We first obtain an empirical representation of the monetary transmission mechanism in the United Kingdom and then estimate the models by minimizing the difference between this representation and its model equivalents. We find that both models can explain the data reasonably well without relying on undue amounts of price and wage stickiness.

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Bibliographic Info

Article provided by International Journal of Central Banking in its journal International Journal of Central Banking.

Volume (Year): 8 (2012)
Issue (Month): 4 (December)
Pages: 97-119

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Handle: RePEc:ijc:ijcjou:y:2012:q:4:a:4

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Cited by:
  1. Millard, Stephen, 2011. "An estimated DSGE model of energy, costs and inflation in the United Kingdom," Bank of England working papers 432, Bank of England.
  2. Dixon, H. & Le Bihan, H., 2011. "Generalized Taylor and Generalized Calvo price and wage-setting: micro evidence with macro implications," Working papers 324, Banque de France.
  3. Julien Albertini & Güneş Kamber & Michael Kirker, 2011. "An estimated small open economy model with frictional unemployment," Reserve Bank of New Zealand Discussion Paper Series DP2011/04, Reserve Bank of New Zealand.

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