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Is There a Trade-Off between Inflation and Output Stabilization?

  • Alejandro Justiniano
  • Giorgio E. Primiceri
  • Andrea Tambalotti

We find that the answer is no in an estimated DSGE model of the US economy in which exogenous movements in workers' market power are not a major driver of observed economic fluctuations. If they are, the tension between the conflicting stabilization objectives of monetary policy increases, but with negligible effects on the equilibrium behavior of the economy under optimal policy. (JEL E12, E23, E24, E31, E32, E52)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/mac.5.2.1
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Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 5 (2013)
Issue (Month): 2 (April)
Pages: 1-31

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Handle: RePEc:aea:aejmac:v:5:y:2013:i:2:p:1-31
Note: DOI: 10.1257/mac.5.2.1
Contact details of provider: Web page: https://www.aeaweb.org/aej-macro
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