Download Monetary Policy, Inflation, and the Business Cycle: An by Jordi Galí PDF

By Jordi Galí

This revised moment variation of Monetary coverage, Inflation, and the enterprise Cycle offers a rigorous graduate-level creation to the recent Keynesian framework and its functions to financial coverage. the hot Keynesian framework is the workhorse for the research of financial coverage and its implications for inflation, financial fluctuations, and welfare. A spine of the hot new release of medium-scale types below improvement at significant relevant banks and foreign coverage associations, the framework offers the theoretical underpinnings for the cost stability-oriented concepts followed by means of so much significant banks within the industrialized international.

Using a canonical model of the recent Keynesian version as a reference, Jordi Galí explores quite a few matters relating financial policy's layout, together with optimum financial coverage and the desirability of straightforward coverage principles. He analyzes numerous extensions of the baseline version, taking into account cost-push shocks, nominal salary rigidities, and open financial system components. In every one case, the results on financial coverage are addressed, with emphasis at the desirability of inflation-targeting regulations. New fabric comprises the 0 reduce sure on nominal rates of interest and an research of unemployment's value for financial policy.

  • The most recent creation to the recent Keynesian framework to be had
  • A unmarried benchmark version used all through
  • New fabrics and routines included
  • An excellent source for graduate scholars, researchers, and marketplace analysts

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Additional info for Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework

Sample text

Friedman and F. H. ), Handbook of Monetary Economics 2, Elsevier-Science, New York. Woodford, Michael (2003): Interest and Prices: Foundations of a Theory of Monetary Policy, Princeton University Press, Princeton, NJ. 1 Optimality Conditions under Nonseparable Leisure Derive the log-linearized optimality conditions of the household problem under the following specification of the period utility function with nonseparable leisure. 2 37 Alternative Interest Rules for the Classical Economy Consider the simple classical economy described in the text, in which the following approximate equilibrium relationships must be satisfied yt = Et {yt+1 } − 1 (it − Et {πt+1 } − ρ) σ and rt ≡ it − Et {πt+1 } = ρ + σ Et { yt+1 } and where yt and, hence, rt , are determined independently of monetary policy.

Condition (43) equates the marginal utility of real balances to the “social” marginal cost of producing real balances, which is implicitly assumed to be zero in the setting. Under what conditions does the equilibrium of the decentralized economy satisfy efficiency conditions (42) and (43)? First note that condition (42) is implied by the combined effect of profit maximization by firms (see equation (13), which equates the real wage to the marginal product of labor) and the optimal labor supply choice by the household (see equation (4), which equates the real wage to the marginal rate of substitution between hours of work and consumption).

2, the above environment implies that the aggregate price dynamics are described by the equation 1−ε t = θ + (1 − θ ) Pt∗ Pt−1 1−ε (6) t where t ≡ PPt−1 is the gross inflation rate between t − 1 and t, and Pt∗ is the price set in period t by firms reoptimizing their price in that period. Notice that, as shown below, all firms will choose the same price because they face an identical problem. It follows from (6) that in a steady state with zero inflation ( = 1), 44 3. The Basic New Keynesian Model Pt∗ = Pt−1 = Pt for all t.

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