We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
ON PHASE SHIFTS IN A NEW KEYNESIAN MODEL ECONOMY.
- Authors
Li, Xue; Haslag, Joseph H.
- Abstract
The purpose of this paper is to focus directly on the phase shift. For one thing, we ask whether a New Keynesian sticky-price model economy can account for both countercyclical prices and procyclical inflation. We present findings in which the price level is countercyclical and the inflation rate is procyclical. We proceed to use the model economy as an identification mechanism. What set of individual shocks are necessary to account for the phase shift? That set contains the price markup shock. Next, we ask what set of shocks are sufficient to account for the phase shift. This set contains three elements: the price markup and wage markup shocks along with the government spending shock. The results are important as a building block. We infer that price stickiness is an important model feature; without price stickiness, we are in the real business cycle economies that Cooley and Hansen studied. But, it raises further questions. For instance, is price stickiness of the Calvo form—the one used here—necessary to explain the phase shift?
- Subjects
PRICE markup; BUSINESS cycles; PRICE levels; PUBLIC spending; PRICE inflation; WAGES
- Publication
Macroeconomic Dynamics, 2021, Vol 48, Issue 1, p2080
- ISSN
1365-1005
- Publication type
Article
- DOI
10.1017/S136510051900097X