Creator: Rotemberg, Julio. Series: Lucas expectations anniversary conference Abstract:
I show that a simple sticky price model based on Rotemberg (1982) is consistent with a variety of facts concerning the correlation of prices, hours and output. In particular, I show that it is consistent with a negative correlation between the detrended levels of output and prices when the Beveridge-Nelson method is used to detrend both the price and output data. Such a correlation, i.e.,a negative correlation between the predictable movements in output and the predictable movements in prices is present (and very strong) in U.S. data. Consistent with the model, this correlation is stronger than correlations between prices and hours of work. I also study the size of the predictable price movements that are associated with predictable output movements as well as the degree to which there are predictable movements in monetary aggregates associated with predictable movements in output. These facts are used to shed light on the degree to which the Federal Reserve has pursued a policy designed to stabilize expected inflation.
Keyword: Monetary policy, Output, Inflation, Federal Reserve, and Prices Subject (JEL): E31 - Prices, business fluctuations, and cycles - Price level ; Inflation ; Deflation, E24 - Macroeconomics : Consumption, saving, production, employment, and investment - Employment ; Unemployment ; Wages ; Intergenerational income distribution ; Aggregate human capital, E23 - Macroeconomics : Consumption, saving, production, employment, and investment - Production, and E50 - Monetary policy, central banking, and the supply of money and credit - General
Creator: Bertola, Giuseppe. Series: Economic growth and development Abstract:
This paper proposes a model of diversifiable uncertainty, irreversible investment decisions, and endogenous growth. The detailed microeconomic structure of the model makes it possible to study the. general equilibrium effects of obstacles to labor mobility, due to institutional as well as technological features of the economy. Labor mobility costs reduce private returns to investment, and the resulting slower rate of endogenous growth unambiguously lowers a representative individual's welfare. Turnover costs can have positive effects on full employment equilibrium wages when all external effects are disregarded: this may help explain why policy and institutions often tend to decrease labor mobility in reality, rather than to enhance it. Lower flexibility, however, reduces the growth rate of wages in endogenous growth equilibrium, with negative welfare effects even for agents who own only labor.
Subject (JEL): E24 - Macroeconomics : Consumption, saving, production, employment, and investment - Employment ; Unemployment ; Wages ; Intergenerational income distribution ; Aggregate human capital, O41 - One, Two, and Multisector Growth Models, and E25 - Aggregate Factor Income Distribution