Lectures 5-6 "New Keynesian" Model of Monetary Policy Analysis - Discretion Flashcards
why does montary policy matter for the real economy?
conventional explanation is that prices and wages are stickys
how sticky are prices?
NAKAMURA and Steinson (2008: median duration of a price change is 11 months
huge heterogeneity between sectors (0.5 to 27 months
0
how sticky are wages?
why does clarida, Gali and gertler 1999 denote the models as new keynisan
??
what is the simple baseline framework from clarid gali and gertler 1999 for the household?
what is the simple baseline framework from clarid gali and gertler 1999 for the firm?
what is the simple baseline framework from clarid gali and gertler 1999 for the central bank?
they implement monetary policy
what is the euler equation for th households maximisation problem in the fully simplified form?
what is the new keynsian phillips curve equation?
how is the microfounded loss function derived?
what is the simplified micro founded loss function?
where α is the relative weight on output gap.
what occurs under discretion?
what is the discretion key result 1 for the NK model of monetary policy?
what is the second key result of discretion?
output is only dependent on the cost push shock, by lowering output in order to bring inflation closer to inflation target for monetary policy
what occurs between the trade iff between the output and cost push shock in graphical form?
bank cant stablise both inflation and output at same time so shows tradeoff for volatility of inflation and output, a goes to infinity then they care about output volatility. when a goes to zero then they only care about inflation volatility
what is the third key result of discretion?
what is the empiracle estimate for the taylor principle?
what is the differences between discretion and commitment?
what are the gains to committment?
what is a summary of the discrection results?
