Colciago, Andrea (2006): Rule of Thumb Consumers Meet Sticky Wages.
This is the latest version of this item.
Download (369Kb) | Preview
It has been argued that rule of thumb consumers substantially alter the determinacy properties of simple interest rate rules and the dynamics of an otherwise standard New-keynesian model. In this paper we show that nominal wage stickiness helps re-establishing standard results. Key findings are that wage stickiness i) affects the shape of determinacy regions in the parameters space, restoring the relevance of the Taylor principle for the conduct of monetary policy; ii) implies that a rise in consumption in response to an innovation in government spending is not a robust feature of the model.
|Item Type:||MPRA Paper|
|Institution:||University of Milano Bicocca|
|Original Title:||Rule of Thumb Consumers Meet Sticky Wages|
|Keywords:||Rule of Thumb Consumers; Sticky Wages; Determinacy; Fiscal Shocks|
|Subjects:||E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E30 - General
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E21 - Consumption; Saving; Wealth
|Depositing User:||Andrea Colciago|
|Date Deposited:||29. Jun 2007|
|Last Modified:||22. Feb 2013 14:37|
Bilbiie, Florin. (2005). "Limited Asset Market Participation, Monetary Policy,and Inverted Keynesian Logic." Working Paper, Nuffield College, Oxford U. Blanchard, Olivier J. and Perotti, Roberto. (2002)." An empirical characterization of the dynamic effects of changes in government spending and taxes on output." Quarterly Journal of Economics. 117, 1329-1368. Burnside, Craig, Eichembaum, Martin, and Fisher, Jonas. (2004). "Fiscal shocks and their consequences". Journal of Economic Theory 115, 89-117. Calvo, Guillermo. (1983). "Staggered Prices in a Utility Maximizing Framework". Journal of Monetary Economics 12, 383-398. Campbell, John Y., Mankiw, Gregory N. (1989)." Consumption, Income, and Interest Rates: Reinterpreting the Time Series Evidence." NBER Macroeconomics Annual 1989, edited by O.J. Blanchard and S.Fischer, pp 185-216. MIT Press. Carlstrom, Charles and Fuerst, Timothy, (2005)." Investment and Interest rate policy: a discrete time analysis." Journal of Economic Theory 123, pp. 4-20. Di Bartolomeo, Giovanni and Rossi, Lorenza (2005). "Efficay of Monetary Policy and Limited asset market Partecipation". International Journal of Economic Theory. Forthcoming. Erceg, Christopher, Henderson, Dale and Levin, Andrew. (2000). "Optimal monetary policy with staggered Wage and Price Contracts." Journal of Monetary Economics 46, 281-313. Erceg, C.J., Guerrieri, L. and Gust, C. J., (2005). "SIGMA A New Open Economy Model for Policy Analysis," Federal Reserve Board, International Finance Discussion Papers, no. 835. Fatás, Antonio and Mihov, Ilian (2001). "Government size and automatic stabilizers: international and intranational evidence." Journal of International Economics 55, 3-28. Galí, Jordi. (2003). "New Perspective on Monetary Policy, Inflation and the Business Cycle (2003)." In Advances in Economic Theory, edited by Dewatripoit M., Hansen L. and S. Turnovsky, vol. III, 151-197. Cambridge University Press. Galí, Jordi, López-Salido David and Valles, Janvier. (2004). "Rule-of-Thumb Consumers and the Design of Interest Rate Rules." Journal of Money, Credit and Banking, 36, August 2004, 739-764. Galí, Jordì, López-Salido David and Valles, Janvier.(2005). "Understanding the Effects of Government Spending on Consumption." Forthcoming on the Journal of the European Economic Association. Levin, Andrew T., Alexei Onatski, John C. Williams, and Noah Williams, "Monetary Policy Under Uncertainty in Micro-Founded Macroeconometric Models," manuscript prepared for the NBER's Twentieth Annual Conference on Macroeconomics, March 31, 2005. Mankiw,Gregory. (2000)."The Savers-Spenders Theory of Fiscal Policy." The American Economic Review, 90 (2), pp.120-125. Muscatelli, Anton, Tirelli Patrizio and Trecroci, Carmine. (2003). "Can fiscal policy help macroeconomic stabilization? Evidence from a New Keynesian model with liquidity constraints." CESifo wp No. 1171. Rotemberg, Julio J., and Michael Woodford, "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy." NBER macroeconomics annual 1997, edited by Bernanke B and Julio J. Rotemberg pp. 297-346. Cambridge and London: MIT Press. Schmitt-Grohe, Stephanie and Uribe Martin. (2004a)."Optimal operational monetary policy in the Christiano-Eichenbaum-Evans model of the U.S. business cycle." NBER wp No. 10724. Schmitt-Grohe, Stephanie and Uribe Martin (2004b)."Optimal simple and implementable monetary and fiscal rules." NBER wp No. 10253. Smets, F. and R. Wouters (2003)."An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area." Journal of the European Economic Association 1, pp 1124-1175. Woodford, Michael.(2003). "Interest and Prices." Princeton University Press.
Available Versions of this Item
Rule of Thumb Consumers Meet Sticky Wages. (deposited 18. May 2007)
- Rule of Thumb Consumers Meet Sticky Wages. (deposited 29. Jun 2007) [Currently Displayed]