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Endogenous Growth, Monetary Shocks and Nominal Rigidities

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  • Annicchiarico, Barbara
  • Pelloni, Alessandra
  • Lorenza, Rossi

Abstract

We introduce endogenous growth in an otherwise standard NK model with staggered prices and wages. Some results follow: (i) monetary volatility negatively affects long-run growth; (ii)the relation between nominal volatility and growth depends on the persistence of the nominal shocks and on the Taylor rule considered; (iii) a Taylor rule with smoothing increases the negative effect of nominal volatility on mean growth.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 25647.

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Date of creation: Aug 2010
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Handle: RePEc:pra:mprapa:25647

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Keywords: Growth; volatility; business cycle; monetary policy;

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  1. Tom Krebs, 2003. "Growth and Welfare Effects of Business Cycles in Economies with Idiosyncratic Human Capital Risk," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(4), pages 846-868, October.
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  3. Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc.
  4. K Blackburn & A Pelloni, 2002. "Growth, Cycles and Stabilisation Policy," The School of Economics Discussion Paper Series, Economics, The University of Manchester 0216, Economics, The University of Manchester.
  5. Barbara Annicchiarico & Luisa Corrado & Alessandra Pelloni, 2008. "Long-Term Growth and Short-Term Volatility: The Labour Market Nexus," CDMA Working Paper Series, Centre for Dynamic Macroeconomic Analysis 200806, Centre for Dynamic Macroeconomic Analysis.
  6. Jean-Guillaume Sahuc & Frank Smets, 2007. "Differences in interest rate policy at the ECB and the Fed : an investigation with a medium-scale DSGE model," Documents de recherche, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne 07-07, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
  7. Blackburn, Keith & Pelloni, Alessandra, 2004. "On the relationship between growth and volatility," Economics Letters, Elsevier, Elsevier, vol. 83(1), pages 123-127, April.
  8. Vaona, Andrea, 2012. "Inflation And Growth In The Long Run: A New Keynesian Theory And Further Semiparametric Evidence," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 16(01), pages 94-132, February.
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  13. de Hek, Paul & Roy, Santanu, 2001. "On Sustained Growth under Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(3), pages 801-13, August.
  14. Dotsey, Michael & Sarte, Pierre Daniel, 2000. "Inflation uncertainty and growth in a cash-in-advance economy," Journal of Monetary Economics, Elsevier, Elsevier, vol. 45(3), pages 631-655, June.
  15. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(5), pages 1002-37, October.
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  17. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, Elsevier, vol. 12(3), pages 383-398, September.
  18. Evans, Lynne & Kenc, Turalay, 2003. "Welfare Cost Of Monetary And Fiscal Policy Shocks," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 7(02), pages 212-238, April.
  19. Larry E. Jones & Rodolfo E. Manuelli & Henry E. Siu & Ennio Stacchetti, 2005. "Fluctuations in Convex Models of Endogenous Growth I: Growth Effects," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(4), pages 780-804, October.
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Citations

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Cited by:
  1. Andrea Vaona, 2013. "Inflation gifts and endogenous growth through learning-by-doing," Working Papers, University of Verona, Department of Economics 09/2013, University of Verona, Department of Economics.
  2. Barbara Annicchiarico & Alessandra Pelloni, 2013. "Productivity Growth and Volatility: How Important Are Wage and Price Rigidities?," Working Paper Series, The Rimini Centre for Economic Analysis 02_13, The Rimini Centre for Economic Analysis.
  3. Annicchiarico, Barbara & Rossi, Lorenza, 2013. "Optimal monetary policy in a New Keynesian model with endogenous growth," Journal of Macroeconomics, Elsevier, Elsevier, vol. 38(PB), pages 274-285.
  4. Olmos, Lorena & Sanso Frago, Marcos, 2014. "Monetary policy and growth with trend inflation and financial frictions," MPRA Paper 54606, University Library of Munich, Germany.
  5. Paul Levine, 2012. "Policy focus: Monetary policy in an uncertain world: probability models and the design of robust monetary rules," Indian Growth and Development Review, Emerald Group Publishing, Emerald Group Publishing, vol. 5(1), pages 70-88, April.

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