Imperfect Common Knowledge, Staggered Price Setting, and the Effects of Monetary Policy PDF Download
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Author: Ichirō Fukunaga
Publisher:
ISBN:
Category : Government information
Languages : en
Pages : 42
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Book Description
"This paper studies the consequences of a lack of common knowledge in the transmission of monetary policy by integrating the Woodford (2003a) imperfect common knowledge model with Taylor-Calvo staggered price-setting models. The average price set by monopolistically competitive firms who can only observe the state of the economy through noisy private signals depends on their higher-order expectations about not only the current state but also about the states in the future periods in which prices are to be fixed. This integrated model provides a plausible explanation for the observed effects of monetary policy: it shows analytically how price adjustments are delayed and how the response of output to monetary disturbances is amplified. I also consider a more general information structure in which a noisy public signal, in addition to the private signals, is introduced."--Author's abstract.
Author: Ichirō Fukunaga
Publisher:
ISBN:
Category : Government information
Languages : en
Pages : 42
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Book Description
"This paper studies the consequences of a lack of common knowledge in the transmission of monetary policy by integrating the Woodford (2003a) imperfect common knowledge model with Taylor-Calvo staggered price-setting models. The average price set by monopolistically competitive firms who can only observe the state of the economy through noisy private signals depends on their higher-order expectations about not only the current state but also about the states in the future periods in which prices are to be fixed. This integrated model provides a plausible explanation for the observed effects of monetary policy: it shows analytically how price adjustments are delayed and how the response of output to monetary disturbances is amplified. I also consider a more general information structure in which a noisy public signal, in addition to the private signals, is introduced."--Author's abstract.
Author: Ichiro Fukunaga
Publisher:
ISBN:
Category :
Languages : en
Pages : 28
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Author: Ichiro Fukunaga
Publisher:
ISBN:
Category :
Languages : en
Pages : 28
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Author: Michael T. Kiley
Publisher:
ISBN:
Category : Prices
Languages : en
Pages : 50
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Author: Laurence M. Ball
Publisher:
ISBN:
Category : Macroeconomics
Languages : en
Pages : 32
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Book Description
Many Keynesian macroeconomic models are based on the assumption that firms change prices at different times. This paper presents an explanation for this "staggered" price setting. We develop a model in which firms have imperfect knowledge of the current state of the economy and gain information by observing the prices set by others. This gives each firm an incentive to set its price shortly after as many firms as possible. Staggering can be the equilibrium outcome. In addition, the information gains can make staggering socially optimal even though it increases aggregate fluctuations
Author: Federico Etro
Publisher:
ISBN:
Category :
Languages : en
Pages : 29
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Book Description
We reconsider the New Keynesian model with staggered price setting when each market is characterized by a small number of firms competing in prices à la Bertrand rather than a continuum of isolated monopolists. Price adjusters change their prices less when there are more firms that do not adjust, creating a natural and strong form of real rigidity. In a DSGE model with Calvo pricing this reduces the level of nominal rigidities needed to generate high reactions of output to monetary shocks. As a consequence, the determinacy region enlarges and the optimal monetary rule under cost push shocks, derived with the linear quadratic approach, becomes less aggressive, and the welfare gains from commitment to the optimal monetary policy decrease.
Author: Roman Frydman
Publisher: Princeton University Press
ISBN: 0691261156
Category : Business & Economics
Languages : en
Pages : 368
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Book Description
Posing a major challenge to economic orthodoxy, Imperfect Knowledge Economics asserts that exact models of purposeful human behavior are beyond the reach of economic analysis. Roman Frydman and Michael Goldberg argue that the longstanding empirical failures of conventional economic models stem from their futile efforts to make exact predictions about the consequences of rational, self-interested behavior. Such predictions, based on mechanistic models of human behavior, disregard the importance of individual creativity and unforeseeable sociopolitical change. Scientific though these explanations may appear, they usually fail to predict how markets behave. And, the authors contend, recent behavioral models of the market are no less mechanistic than their conventional counterparts: they aim to generate exact predictions of "irrational" human behavior. Frydman and Goldberg offer a long-overdue response to the shortcomings of conventional economic models. Drawing attention to the inherent limits of economists' knowledge, they introduce a new approach to economic analysis: Imperfect Knowledge Economics (IKE). IKE rejects exact quantitative predictions of individual decisions and market outcomes in favor of mathematical models that generate only qualitative predictions of economic change. Using the foreign exchange market as a testing ground for IKE, this book sheds new light on exchange-rate and risk-premium movements, which have confounded conventional models for decades. Offering a fresh way to think about markets and representing a potential turning point in economics, Imperfect Knowledge Economics will be essential reading for economists, policymakers, and professional investors.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
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The U.S. Federal Reserve Board presents an abstract of the 1999 paper entitled "Partial Adjustment and Staggered Price Setting," written by Michael T. Kiley. The full text is available in PDF format and the paper is part of the Finance and Economics Discussion Series. This paper compares staggered price setting to partial adjustment of prices. The results provide clarification on the persistence of output responses to monetary shocks and reveals important quantitative differences between the stabilizing properties of different monetary policies across sticky price specifications.
Author: Jordi Galí
Publisher: University of Chicago Press
ISBN: 0226278875
Category : Business & Economics
Languages : en
Pages : 663
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Book Description
United States monetary policy has traditionally been modeled under the assumption that the domestic economy is immune to international factors and exogenous shocks. Such an assumption is increasingly unrealistic in the age of integrated capital markets, tightened links between national economies, and reduced trading costs. International Dimensions of Monetary Policy brings together fresh research to address the repercussions of the continuing evolution toward globalization for the conduct of monetary policy. In this comprehensive book, the authors examine the real and potential effects of increased openness and exposure to international economic dynamics from a variety of perspectives. Their findings reveal that central banks continue to influence decisively domestic economic outcomes—even inflation—suggesting that international factors may have a limited role in national performance. International Dimensions of Monetary Policy will lead the way in analyzing monetary policy measures in complex economies.
Author: Laurence Ball
Publisher:
ISBN:
Category : Macroeconomics
Languages : en
Pages : 48
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Book Description
