کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
964894 | 1479230 | 2014 | 13 صفحه PDF | دانلود رایگان |
• This paper studies the welfare consequences of variations in trend inflation.
• I find that the welfare cost of drifting trend inflation is modest.
• The welfare cost comes mainly from reduced average levels of consumption and leisure.
This paper studies the welfare consequences of exogenous variations in trend inflation in a New Keynesian economy. Consumption and leisure respond asymmetrically to a rise and a decline in trend inflation. As a result, an increase in the variance of shocks to the trend inflation process decreases welfare not only by increasing the volatilities of consumption and leisure, but also by decreasing their average levels. I find that the welfare cost of drifting trend inflation is modest and that it comes mainly from reduced average levels of consumption and leisure, not from their increased volatilities.
Journal: Journal of Macroeconomics - Volume 41, September 2014, Pages 66–78