Endogenous Shocks in the New Keynesian Model

The New Keynesian literature has recently devoted considerable attention to endogenous shocks to the Phillips curve. One reason for such scrutiny is their ability to generate a meaningful tradeoff between inflation and the output gap without resorting to ad hoc exogenous shocks. Chapter 1 surveys three mechanisms that give rise to such endogenous shocks: the cost channel of transmission of monetary policy, nominal wage stickiness, and incomplete pass-through. With some reservations, these endogenous shocks produce the same sort of behavior of the model's variables in response to a technological shock as they would exhibit in response to an ad hoc cost-push shock. Chapters 2 and 3 consider the role of the cost channel in detailed theoretical and empirical settings. The cost channel may produce a cogent explanation to the so-called 'price puzzle', which may be discerned only from the monthly but not the quarterly data. Finally, Chapter 4 provides empirical estimates of some structural parameters that characterize the New Keynesian model with nominal wage stickiness using the generalized method of moments. One important finding is that the duration of price and nominal wage contracts may have been significantly overestimated in the previous literature.

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

Dissertation

Discipline thesis:degree_discipline

Economics

Grantor

University of Illinois at Urbana-Champaign

Year dc:date

2015

Author dc:creator

• Kapinos, Pavel

Contributors dc:contributor

• Juha Seppala

• Economics, Theory

Language dc:language

eng

Identifier

(MiAaPQ)AAI3153342

OAI identifier oai:identifier

oai:www.ideals.illinois.edu:2142/85549