The Robert Day School of Economics and Finance
Claremont McKenna College
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Claremont, CA 91711
NBER Working Papers and Publications
|June 2016||Are Supply Shocks Contractionary at the ZLB? Evidence from Utilization-Adjusted TFP Data|
with Robert Lester, Eric Sims: w22311
The basic New Keynesian model predicts that positive supply shocks are less expansionary at the zero lower bound (ZLB) compared to periods of active monetary policy. We test this prediction empirically using Fernald's (2014) utilization-adjusted total factor productivity series, which we take as a measure of exogenous productivity. In contrast to the predictions of the model, positive productivity shocks are estimated to be more expansionary at the ZLB compared to normal times. However, in line with the predictions of the basic model, positive productivity shocks have a stronger negative effect on inflation at the ZLB.
|April 2016||Raise Rates to Raise Inflation? Neo-Fisherianism in the New Keynesian Model|
with Robert Lester, Eric Sims: w22177
Increasing the inflation target in a textbook New Keynesian (NK) model may require increasing, rather than decreasing, the nominal interest rate in the short run. We refer to this positive short run co-movement between the nominal interest rate and inflation conditional on a nominal shock as Neo-Fisherianism. We show that the NK model is more likely to be Neo-Fisherian the more persistent is the change in the inflation target and the more flexible are prices. Neo-Fisherianism is driven by the forward-looking nature of the model. Modifications which make the framework less forward-looking make it less likely for the model to exhibit Neo-Fisherianism. As an example, we show that a modest and empirically realistic fraction of "rule of thumb" price-setters may altogether eliminate Neo-Fisheria...
|July 2015||On the Desirability of Nominal GDP Targeting|
with Robert Lester, Eric Sims: w21420
This paper evaluates the welfare properties of nominal GDP targeting in the context of a New Keynesian model with both price and wage rigidity. In particular, we compare nominal GDP targeting to inflation and output gap targeting as well as to a conventional Taylor rule. These comparisons are made on the basis of welfare losses relative to a hypothetical equilibrium with flexible prices and wages. Output gap targeting is the most desirable of the rules under consideration, but nominal GDP targeting performs almost as well. Nominal GDP targeting is associated with smaller welfare losses than a Taylor rule and significantly outperforms inflation targeting. Relative to inflation targeting and a Taylor rule, nominal GDP targeting performs best conditional on supply shocks and when wages a...
Published: Julio Garín & Robert Lester & Eric Sims, 2016. "On the Desirability of Nominal GDP Targeting," Journal of Economic Dynamics and Control, . citation courtesy of