scholarly journals The Godley-Tobin lecture

2020 ◽  
Vol 8 (1) ◽  
pp. 1-20 ◽  
Author(s):  
Robert Rowthorn
Keyword(s):  
Monetary Policy ◽  
Phillips Curve ◽  
New Keynesian ◽  
Monetary Theory ◽  
Unconventional Monetary Policy ◽  
Heterodox Economics ◽  
Mainstream Economics ◽  
Keynesian Economics ◽  
Degree Of Convergence

This paper surveys some of the main developments in macroeconomics since the anti-Keynesian counter-revolution 40 years ago. It covers both mainstream and heterodox economics. Amongst the topics discussed are: New Keynesian economics, Modern Monetary Theory, expansionary fiscal contraction, unconventional monetary policy, the Phillips curve, hysteresis, and heterodox theories of growth and distribution. The conclusion is that Keynesian economics is alive and well, and that there has been a degree of convergence between heterodox and mainstream economics.

ARE MAJOR CENTRAL BANKS BLINDED BY THE ANALYTICAL ELEGANCE OF THEIR MODELS? POSSIBLE COSTS OF UNCONVENTIONAL MONETARY POLICY MEASURES

2017 ◽  
Vol 62 (01) ◽  
pp. 87-108 ◽  
Author(s):  
PIOTR CIŻKOWICZ ◽  
ANDRZEJ RZOŃCAZ
Keyword(s):  
Monetary Policy ◽  
Global Financial Crisis ◽  
Significant Risk ◽  
Central Banks ◽  
New Keynesian ◽  
New Keynesian Model ◽  
Unconventional Monetary Policy ◽  
Keynesian Model ◽  
Policy Measures ◽  
The Global Financial Crisis

We survey the possible costs of the unconventional monetary policy measures undertaken by major central banks after the outbreak of the global financial crisis in 2008. We argue that these costs are not easily discernable in the new Keynesian (NK) model, which defines a theoretical framework for monetary policy. First, the costs may result from the effects of unconventional monetary policy measures on the intensity of restructuring and the persistence of uncertainty (which increased after the outbreak of the crisis). However, neither of these processes is considered in the new Keynesian model. Second, costs may be generated not only by distortions in the choices made by economic agents but may also be a result of the decisions made by governments, particularly in terms of the fiscal deficit level. However, the new Keynesian model does not consider the effects of unconventional monetary policy measures on the quality of fiscal policy. Without carefully considering the costs, there is a significant risk that unconventional monetary policy measures could become a conventional response to recurrent crises.

Inclusion of Asset Prices: An Argument for Monetary Policy and the Phillips Curve

2018 ◽  
Vol 64 (3) ◽  
pp. 239-252
Author(s):  
Alexander Mislin
Keyword(s):  
Monetary Policy ◽  
Asset Prices ◽  
Price Index ◽  
Phillips Curve ◽  
House Prices ◽  
Optimization Procedure ◽  
New Keynesian ◽  
Keynesian Model ◽  
Consumer Prices ◽  
Dynamic Stochastic

Abstract This article develops an augmented price index that includes house prices, so that the relationship between inflation and unemployment levels in the traditional Phillips curve can be better represented. This general price index may be considered complementary to the Harmonised Index of Consumer Prices (HICP) and establishes the model-theoretical basis for a new-Keynesian model that derives the conditions for a monetary policy rule in a dynamic stochastic optimization procedure. Based on a simple stochastic differential equation for augmented inflation, we show that the reaction of the central bank depends on the marginal effects on augmented inflation and the output gap of an infinitesimal change in asset prices. This analysis could be interpreted as a way of using asset prices for a general price index, being an adequate method to restore monetary credibility. JEL classifications: E52, E58, G10 Keywords: monetary policy, asset prices, Phillips curve

Trend Inflation, Indexation, and Inflation Persistence in the New Keynesian Phillips Curve

2008 ◽  
Vol 98 (5) ◽  
pp. 2101-2126 ◽  
Author(s):  
Timothy Cogley ◽  
Argia M Sbordone
Keyword(s):  
Monetary Policy ◽  
Ad Hoc ◽  
Phillips Curve ◽  
New Keynesian ◽  
Time Varying ◽  
New Keynesian Phillips Curve ◽  
Inflation Persistence ◽  
Long Run ◽  
Trend Inflation ◽  
Forward Looking

Purely forward-looking versions of the New Keynesian Phillips curve (NKPC) generate too little inflation persistence. Some authors add ad hoc backward-looking terms to address this shortcoming. We hypothesize that inflation persistence results mainly from variation in the long-run trend component of inflation, which we attribute to shifts in monetary policy. We derive a version of the NKPC that incorporates a time-varying inflation trend and examine whether it explains the dynamics of inflation. When drift in trend inflation is taken into account, a purely forward-looking version of the model fits the data well, and there is no need for backward-looking components. (JEL E12, E31, E52)

Α Model of Debt Deflation and the Phillips Curve: Implications for Business Cycles and the Balance Sheet Channel of Monetary Policy / Schulden-Deflation und die Phillips-Kurve: Implikationen für Konjunkturzyklen und den Bilanzkanal der Geldpolitik

2000 ◽  
Vol 220 (4) ◽  
Author(s):  
Lutz Arnold
Keyword(s):  
Monetary Policy ◽  
Business Cycles ◽  
Phillips Curve ◽  
Balance Sheet ◽  
New Keynesian ◽  
Inflation Expectations ◽  
Natural Rate ◽  
Net Worth ◽  
Balance Sheet Channel ◽  
Debt Deflation

SummaryNew Keynesian economics stresses the positive link between firms’ net worth, on the one hand, and the equilibrium level of credit granted and aggregate employment, on the other hand. The present paper argues that once money is introduced and adaptive inflation expectations are assumed, an accelerationist Phillips curve emerges: because of debt deflation, an increase in the rate of inflation reduces firms' real debt burden; because of the negative link between real debt and employment, unemployment falls. The natural rate of unemployment is the rate that occurs when inflation is constant. Frisch has proposed modeling business cycles by means of stochastic linear second-order difference equations which display damped oscillations in the absence of stochastic impulses. The New Keynesian model with adaptive expectations expounded here gives rise to business cycles in Frisch’s sense. This can be shown by applying Laidler’s result, derived in a different set-up, that the interaction between an accelerationist Phillips curve and the quantity theory of money yields Frisch-type cycles. Moreover, the model presented sheds some light on the working of the balance sheet channel of monetary policy.

scholarly journals Imperfect rationality and inflationary inertia: a new estimation of the Phillips Curve for Brazil

2004 ◽  
Vol 34 (4) ◽  
pp. 725-776 ◽  
Author(s):  
Angelo Marsiglia Fasolo ◽  
Marcelo Savino Portugal
Keyword(s):  
Monetary Policy ◽  
Kalman Filter ◽  
Phillips Curve ◽  
New Keynesian ◽  
Impulse Response Functions ◽  
Response Functions ◽  
Regime Changes ◽  
Inertial Component ◽  
Imperfect Rationality ◽  
The Relationship

This paper presents some new estimates for the relationship between inflation and unemployment in Brazil based on a new Keynesian hypothesis about the behavior of the economy. Four main hypotheses are tested and sustained throughout the study: i) agents do not have perfect rationality; ii) the imperfection in the agents expectations generating process may be an important factor in explaining the high persistence (inertia) of Brazilian inflation; iii) inflation does have an autonomous inertial component, without linkage to shocks in individual markets; iv) a non-linear relationship between inflation and unemployment is able to provide better explanations for the inflation-unemployment relationship in the Brazilian economy in the last 12 years. While the first two hypotheses are tested using a Markov Switching based model of regime changes, the remaining two are tested in a context of a convex Phillips Curve estimated using the Kalman filter. Despite the methodological and estimation improvements provided in the paper, the impulse-response functions for the monetary policy presented the same properties shown in the literature that uses Brazilian data.

The Impact of the Crisis and Unconventional Monetary Policy on European Inflation Dynamics

2018 ◽  
Vol 69 (2) ◽  
pp. 87-110 ◽  
Author(s):  
Benjamin Schäfer
Keyword(s):  
Phillips Curve ◽  
New Keynesian ◽  
Unconventional Monetary Policy ◽  
Subsequent Reaction ◽  
Inflation Dynamics ◽  
Profound Impact ◽  
Crisis Period ◽  
Estimated Parameters ◽  
Structural Hybrid ◽  
The Impact

Abstract This study investigates the impact of the economic crisis in the late 2000s and early 2010s on European inflation dynamics using a hybrid New-Keynesian Phillips Curve (NKPC) during three distinct periods. The pre-crisis period from 1999 through mid-2007, the crisis period until August 2012, and finally the “Whatever-It-Takes”-period after the remark by ECB president Mario Draghi. The structural hybrid NKPC is estimated for six countries of the Euro area (Germany, France, Italy, Spain, The Netherlands and Austria) and for each of the three periods. The crisis and the subsequent reaction of the ECB both seem to have had a profound impact on the dynamics, as estimated parameters differ markedly between the periods. A discussion and interpretation of the results is provided.

Phelps’ Lessons for Russia and for the World Economy (2006 Nobel Prize in Economics)

2007 ◽  
pp. 55-65 ◽  
Author(s):  
O. Zamulin
Keyword(s):  
Economic Theory ◽  
Monetary Policy ◽  
Nobel Prize ◽  
World Economy ◽  
Phillips Curve ◽  
Developed Countries ◽  
Nobel Prize Winner ◽  
New Keynesian ◽  
The World ◽  
The Developed Countries

The author describes the contribution to economic theory made by E. Phelps, the 2006 Nobel prize winner in economics. Phelps is one of those scientists, who studied the reasons, why the attempt to use Phillips curve for the purposes of monetary policy in the 1970s failed. He also became one of the founders of the New Keynesian theory of the Phillips curve. This theory helps to better understand the principles of monetary policy in the developed countries as well as in today’s Russia.

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