This paper develops a small, analytically tractable New Keynesian model with capital accumulation and government debt dynamics. We show that, in the absence of Ricardian equivalence, the latter channel is of conceptual importance for the design of monetary and Þscal policy rules consistent with determinate equilibrium dynamics. Our model can be used to see how deviations from Ricardian equivale...

We build a New Keynesian model of the business cycle with sticky prices and real wage rigidities motivated by efficiency wages of the gift exchange variety. Compared to a standard sticky price model, our Fair Wage model provides an explanation for structural unemployment and generates more plausible labor market dynamics — notably accounting for the low correlation between wages and employment....

Let me first briefly place it in the broader context of current macroeconomic research. First-generation new-Keynesian models, of the type analyzed by Woodford in his well-known book (2003), were based on a few central imperfections, namely monopolistic competition to allow for non-trivial market power and price setting, and nominal rigidities; their purpose was to show how shifts in demand cou...

The workhorse of modern macroeconomics is the New Keynesian model. This model assumes that monetary policy is transmitted through the path of the shortterm nominal interest rate. Money, if it is included at all, is relegated to an inconsequential role in monetary policy analysis. The purpose of this paper is twofold. First, we summarize the literature on the existence and role of money that is ...

This article seeks to check the nonlinearity of the Phillips curve in Tunisia for the 1993–2012 period, relying on a hybrid new Keynesian Phillips curve modeled via a Logistic Smooth Transition Regression (LSTR) model with endogenous variables. We estimate this model using the nonlinear instrumental variables. The empirical results corroborate the new Keynesian assumption ofprice rigidity and s...

T he consequences of the decisions and policies taken for the reconstruction of Afghanistan during the past decade, showed that there should be paid more attention to the monetary policies. There is also a question that whether monetary policies have the potential to affect the production and inflation in Afghanistan or not. The aim of this paper is to explore this effect by designin...

We investigate the importance of trend inflation and the real-activity gap in explaining inflation in G7 countries since 1960. Our analysis is based on a bivariate unobserved components model of inflation and unemployment in which inflation is decomposed into a stochastic trend and a transitory component. As in recent implementations of the New Keynesian Phillips Curve, it is the transitory com...

The standard New Keynesian model suffers from the so-called .macro-micro pricing conflict: in order to match the dynamics of inflation implied by macroeconomic data, the model needs to assume an average duration of price contracts which is much longer than what is observed in micro data. Here I show how departing from the standard model’s assumption of a perfectly competitive labor market can h...

We develop and test a New Keynesian model of inflation dynamics based on the presence of idiosyncratic shocks to firms’ marginal costs. We show that if firms ignore economy-wide influences on their marginal costs, inflation will exhibit a greater degree of inertia than the conventional New Keynesian model suggests. Credible disinflationary policies are likely to be accompanied by recessions rat...