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

  • Günes Kamber

    (Reserve Bank of New Zealand)

  • Stephen Millard

    (Bank of England and Durham Business School)

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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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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  1. Eran Yashiv, 2005. "Evaluating the Performance of the Search and Matching Model," CEP Discussion Papers dp0677, Centre for Economic Performance, LSE.
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  12. Mark Gertler & Luca Sala & Antonella Trigari, 2008. "An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(8), pages 1713-1764, December.
  13. Charlotta Groth & Jarkko Jääskelä & Paolo Surico, 2006. "Fundamental inflation uncertainty," Bank of England working papers 309, Bank of England.
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  17. Harrison, Richard & Oomen, Özlem, 2010. "Evaluating and estimating a DSGE model for the United Kingdom," Bank of England working papers 380, Bank of England.
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