On the Determinacy of New Keynesian Models with Staggered Wage and Price Setting
AbstractThis paper shows that an analytical determinacy analysis of the baseline New Keynesian model with both staggered wages and prices developed by Erceg, Henderson and Levin (2000) is possible despite the high dimensional nature of this model. It is possible if the formulation of the model is translated from discrete to continuous time. Our findings corroborates in an analytical manner Galí's (2008) numerical findings regarding the determinacy frontier and the Taylor principle for this model type, where a generalized Taylor rule that employs a weighted combination of wage and price inflation is used as a measure for the inflation gap.
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Bibliographic InfoPaper provided by IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute in its series IMK Working Paper with number 11-2008.
Length: 20 pages
Date of creation: 2008
Date of revision:
Period models; continuous time; (in)determinacy.;
Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-10-21 (All new papers)
- NEP-CBA-2008-10-21 (Central Banking)
- NEP-LAB-2008-10-21 (Labour Economics)
- NEP-MAC-2008-10-21 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christopher J. Erceg & Dale W. Henderson & Andrew T. Levin, 1999.
"Optimal monetary policy with staggered wage and price contracts,"
International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.)
640, Board of Governors of the Federal Reserve System (U.S.).
- Erceg, Christopher J. & Henderson, Dale W. & Levin, Andrew T., 2000. "Optimal monetary policy with staggered wage and price contracts," Journal of Monetary Economics, Elsevier, Elsevier, vol. 46(2), pages 281-313, October.
- Andrew Levin & Christopher J. Erceg & Dale W. Henderson, 1999. "Optimal Monetary Policy with Staggered Wage and Price Contracts," Computing in Economics and Finance 1999, Society for Computational Economics 1151, Society for Computational Economics.
- Christian R. Proaño & Peter Flaschel & Hans-Martin Krolzig & Mamadou Bobo Diallo, 2011. "Monetary policy and macroeconomic stability under alternative demand regimes," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 35(3), pages 569-585.
- Peter Flaschel & Christian Proano, 2008.
"The J2 Status of Chaos in Period Macroeconomic Models,"
IMK Working Paper, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute
14-2008, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
- Flaschel Peter & Proaño Christian R., 2009. "The J2 Status of "Chaos" in Period Macroeconomic Models," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, De Gruyter, vol. 13(2), pages 1-12, May.
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