This paper uses a New Keynesian framework to study the coordination of fiscal and monetary policies, in response to an inflation shock when the policymaker acts with commitment. We first show that, in the simplest New Keynesian model, fiscal policy plays no part in the optimal policy response, because of the comparative advantage which monetary policy has in the control of inflation. We the...

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...

This paper examines the behaviour of inflation, output, and unemployment in Sub-Saharan Africa (SSA) countries shows that predictions Phillips curve Okun’s law are valid short run. In long run however, coefficient declines greatly turns positive while phenomenon gravitates towards New Keynesian Curve (NKPC) but with a negative relationship. The evidence echoes Friedman’s proposition temporary t...

This paper examines the New Keynesian Phillips curve (NKPC) in Thailand in the two decades from 1993 to 2014 marked by the two large crises of 1997 and 2008. This analysis is significant because expectations and economic growth in Thailand may have been influenced by incidents including coups and natural disasters. The findings are summarized as follows. First, the empirical analysis shows that...

This paper examines a model of dynamic price adjustment based on the assumption that information disseminates slowly throughout the population. Compared to the commonly used sticky-price model, this sticky-information model displays three related properties that are more consistent with accepted views about the effects of monetary policy. First, disinflations are always contractionary (although...

We propose a Bayesian approach to test the New Keynesian Phillips Curve (NKPC) both as an exact relation and as a noisy/potentially misspecified model. We do so in order to reconcile the contradicting evidence that the NKPC is rejected by a Wald test but nevertheless it provides a good approximation of inflation dynamics. We apply the proposed approach to US and EMU data. When the NKPC is teste...