The KMG growth dynamics in Chiarella and Flaschel (2000) assume that wages, prices and quantities adjust sluggishly to disequilibria in labor and goods markets. This paper modifies the KMG model by introducing Steindlian features of capital accumulation and income distribution. The resulting KMGS(teindl) model replaces the neoclassical mediumand long-run features of the original KMG model by a ...

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...

This paper has two related goals: (i) construct a model where money and credit coexist; (ii) pursue in this setting a theory of endogenous sticky prices that can be taken to the data. Search frictions generate price dispersion, and lead to monetary equilibria where profit-maximizing sellers set nominal prices they sometimes keep fixed when aggregate conditions change. Buyers can use cash or cre...

What drives countercyclical volatility? A large literature has documented that many economic variables are more disperse in recessions, but this could either occur because shocks get bigger or because …rms respond more to shocks which are the same size. Existing evidence that the dispersion of endogenous variables rises in recessions cannot tell us which of volatility or responsiveness is getti...

It is a well documented empirical fact that …rm level investment is lumpy rather than smooth. In the present paper we …nd that the aggregate consequences of lumpy investment in general equilibrium are quantitatively important. Earlier results stressing the irrelevance of lumpy investment in general equilibrium are therefore an artefact of assuming perfect competition combined with fully ‡exible...

This paper presents a number of responses to Gordon de Brouwer’s criticisms of my paper on monetary policy in Indonesia. Among other things, it argues that de Brouwer has failed to disentangle the impact of two exogenous disturbances on prices—and relative prices—during the crisis and post-crisis period. These disturbances were capital flight, which resulted in real depreciation of the rupiah, ...

When real balances have even a very small productive role, contemporaneous and forwardlooking Taylor-Wicksell rules can induce ubiquitous multiplicities of equilibria and lead to consequences that are unintended by policymakers. This raises the issue of whether it is possible to anchor and stabilize the economy through backward-looking rules. We show that the standard uniqueness results that ar...

We determine optimal discretionary monetary policy in a New-Keynesian model when nominal interest rates are bounded below by zero. Nominal interest rates should be lowered faster in response to adverse shocks than in the case without bound. Such ‘preemptive easing’ is optimal because expectations of a possibly binding bound in the future amplify the e ects of adverse shocks. Calibrating the mod...

In May 1927, the German central bank intervened indirectly to reduce lending to equity investors. The crash that followed ended the only stock market boom during Germany’s relative stabilization 1924-28. This paper examines the factors that lead to the intervention as well as its consequences. We argue that genuine concern about the ‘exuberant’ level of the stock market, in addition to worries ...