Article ID Journal Published Year Pages File Type
5055227 Economic Modelling 2010 8 Pages PDF
Abstract

In this study, we introduce a constant rate of technological change and money growth into the standard new Keynesian model, in which both prices and nominal wages are supposed to be sticky. Using such a model, we examine whether a policy trade-off exists between curbing inflation and stabilizing the welfare-relevant output gap in the steady state. If we take only price stickiness into consideration, a policy trade-off does not occur. However, if both nominal wage stickiness and price stickiness are taken into consideration, a policy trade-off occurs.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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