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

Author

Listed:
  • 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.

Suggested Citation

  • Günes Kamber & Stephen Millard, 2012. "Using Estimated Models to Assess Nominal and Real Rigidities in the United Kingdom," International Journal of Central Banking, International Journal of Central Banking, vol. 8(4), pages 97-119, December.
  • Handle: RePEc:ijc:ijcjou:y:2012:q:4:a:4
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    References listed on IDEAS

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    Cited by:

    1. Julien Albertini & Güneş Kamber & Michael Kirker, 2012. "Estimated Small Open Economy Model With Frictional Unemployment," Pacific Economic Review, Wiley Blackwell, vol. 17(2), pages 326-353, May.
    2. Giovanni Bartolomeo & Marco Pietro, 2017. "Intrinsic Persistence of Wage Inflation in New Keynesian Models of the Business Cycles," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(6), pages 1161-1195, September.
    3. Huw Dixon & Hervé Le Bihan, 2012. "Generalised Taylor and Generalised Calvo Price and Wage Setting: Micro‐evidence with Macro Implications," Economic Journal, Royal Economic Society, vol. 122(560), pages 532-554, May.
    4. Georgiadis, Georgios & Jancokova, Martina, 2017. "Financial Globalisation, Monetary Policy Spillovers and Macro-modelling: Tales from 1001 Shocks," Globalization and Monetary Policy Institute Working Paper 314, Federal Reserve Bank of Dallas.
    5. Dixon Huw, 2012. "A Unified Framework for Using Micro-Data to Compare Dynamic Time-Dependent Price-Setting Models," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-45, July.
    6. Millard, Stephen, 2015. "The Great Recession and the UK labour market," Bank of England working papers 566, Bank of England.
    7. Gabor Pinter, 2015. "House Prices and Job Losses," Discussion Papers 1507, Centre for Macroeconomics (CFM).
    8. 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.
    9. repec:kap:compec:v:51:y:2018:i:4:d:10.1007_s10614-017-9657-9 is not listed on IDEAS

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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