IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

From the Great Inflation to the Great Moderation: Assessing the Roles of Firm-Specific Labor, Sticky Prices and Labor Supply Shocks

  • Maher Khaznaji
  • Louis Phaneuf
Registered author(s):

    We develop and estimate a dynamic stochastic general equilibrium model that features sticky prices, a variable elasticity of demand facing firms and firm-specific labor. While reconciling to a good extent the micro and macro evidence on the behavior of prices, the model offers an accurate account of the dramatic increase in macroeconomic stability from the Great Inflation (1948:1-1979:II) to the Great Moderation (1984:I-2006:II). Reminiscent of the evidence in Shapiro and Watson (1988), the paper shows that labor-supply shocks are the key source of the reduction in the volatility of output growth, followed by investment-specific shocks. However, changes in the behavior of the private sector, a less accommodative monetary policy and smaller shocks explain almost evenly the large decline of the variability in inflation.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.cirpee.org/fileadmin/documents/Cahiers_2008/CIRPEE08-12.pdf
    Download Restriction: no

    Paper provided by CIRPEE in its series Cahiers de recherche with number 0812.

    as
    in new window

    Length:
    Date of creation: 2008
    Date of revision:
    Handle: RePEc:lvl:lacicr:0812
    Contact details of provider: Postal: CP 8888, succursale Centre-Ville, Montréal, QC H3C 3P8
    Phone: (514) 987-8161
    Web page: http://www.cirpee.org/

    More information through EDIRC

    References listed on IDEAS
    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.:

    as in new window
    1. Sylvain Leduc & Keith Sill, 2003. "Monetary policy, oil shocks, and TFP: accounting for the decline in U.S. volatility," Working Papers 03-22, Federal Reserve Bank of Philadelphia.
    2. Athanasios Orphanides & John C. Williams, 2002. "Robust monetary policy rules with unknown natural rates," Working Paper Series 2003-01, Federal Reserve Bank of San Francisco.
    3. Klein, Paul, 2000. "Using the generalized Schur form to solve a multivariate linear rational expectations model," Journal of Economic Dynamics and Control, Elsevier, vol. 24(10), pages 1405-1423, September.
    4. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-17, June.
    5. Andrews, Donald W K & Fair, Ray C, 1988. "Inference in Nonlinear Econometric Models with Structural Change," Review of Economic Studies, Wiley Blackwell, vol. 55(4), pages 615-39, October.
    6. Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 135-174.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:lvl:lacicr:0812. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Johanne Perron)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.