Aggregate Supply and Potential Output, Issue 10294
The New-Keynesian aggregate supply derives from micro-foundations an inflation-dynamics model very much like the tradition in the monetary literature. Inflation is primarily affected by: (i) economic slack; (ii) expectations; (iii) supply shocks; and (iv) inflation persistence. This paper extends the New Keynesian aggregate supply relationship to include also fluctuations in potential output, as an additional determinant of the relationship. Implications for monetary rules and to the estimation of the Phillips curve are pointed out.
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1050 Massachusetts Avenue affect potential output aggregate supply derives aggregate supply relationship analysis Andrei Shleifer Assaf Razin Authorts back cover Bureau of Economic capital stock consumption demand deterministic steady Discount Factor domain name Economic Research empirical literature Equations 6a equilibrium wage excess capacity fluctuations in potential framework full subscription hard copy imperfect competition Implications inflation rates inflation surprises inflation-output trade-off inside the back instructions inside investment IR/PS Stacks labor market version list To subscribe Log-linearizing loss function Macroeconomics marginal cost Marginal Factor Cost marginal productivity mark-up Monetary and Fiscal monetary policy monetary rules monopolistically competitive National Bureau NBER Working Papers Number optimization problem output gap output level PAPER SERIES papers in hard Partial Subscription price-setting product market version productivity of labor rates and output reaction function rental market Schmitt-Grohe Martin Uribe set their prices single area squared deviations Stephanie Schmitt-Grohe Martin Supply and Potential supply shocks target variable Woodford zero