The long-run optimal degree of indexation in new Keynesian models with price staggering à la Calvo

This note shows that full price indexation is not optimal in the long-run, in the New Keynesian model under trend inflation and price staggering à la Calvo. Moreover, we show that more price stickiness may increase steady state welfare, if price indexation is partial.Indexation, Trend Inflation, New Keynesian model

Inflation persistence, Price Indexation and Optimal Simple Interest Rate Rules

We study the properties of the optimal nominal interest rate policy under different levels of price indexation. In our model indexation regulates the sources of inflation persistence. When indexation is zero, the inflation gap is purely forward- looking and inflation persistence depends only on the level of trend inflation, while full indexation makes the inflation gap persistent and it eliminates the effects of trend inflation. We show that in the former case the optimal policy is inertial and targets inflation stability while in the latter the optimal policy has no inertia and targets the real interest rate. We compare our results with empirical estimates of the FED's policy in the post-WWII era.Inflation Persistence, Taylor Rule, New Keynesian model, Indexation

Trend Inflation, Wage Indexation, and Determinacy in the U.S.

We combine an estimated monetary policy rule featuring time-varying trend inflation and stochastic coefficients with a medium scale New Keynesian framework calibrated on the U.S. economy. We find the impact of variations in trend inflation on the likelihood of equilibrium determinacy to be both modest and limited to the second half of the 1970s. In contrast, our counterfactual exercises suggest that the change in the Federal Reserve's policy response to inflation is likely to have been the main driver leading the U.S. economy to a unique equilibrium during the Great Moderation. We highlight the impact of wage indexation on policymakers' ability to induce economic stability, and provide fresh evidence on the relationship between trend inflation, wage indexation and determinacy in the post-WWII U.S. economic environment. Further simulations show that rising the Federal Reserve's inflation target to four percent would be consistent with equilibrium uniqueness conditional on a policy as the one estimated on the U.S. post-1982 sample period.Monetary Policy, Trend Inflation, Great Moderation, Determinacy, Wage indexation.

The long-run optimal degree of indexation in the new Keynesian model

This note shows that full price indexation is not optimal in the long-run in the New Keynesian model. Moreover, we show that more price stickiness may increase steady state welfare, if price indexation is partial

Optimal simple rules and the lower bound on the nominal interest rate in the Christiano–Eichenbaum–Evans model of the US business cycle

Schmitt-Grohé and Uribe (NBER wp 10724, 2004b) analyzes the optimal, simple and implementable monetary policy rules in a medium-scale macromodel, as the one proposed by Christiano et al. (J Polit Econ 113:1–45, 2005). In doing so, they use a sensible, but somewhat arbitrary constraint to account for the lower bound condition on the nominal interest rate. In this work, we check the robustness of their main results to such a criteria. We find that the optimal policies are actually absolutely robust to the easing of this criterion for all the diff erent cases considered.info:eu-repo/semantics/publishedVersio

Entry and subcontracting in public procurement auctions

We empirically study how the interplay between entry and subcontracting choices is affected by the use of different auctions formats in public procurement. The difference-in-differences strategy used exploits a dataset of auctions for public works run alternately under first price and average bid auctions. We find that the use of first price auctions causes a marked decline in both entry and subcontracting. We also nd that the type of firms entering first price auctions changes with firms becoming more likely to bid jointly with other firms in ad-hoc joint ventures

Inflation Persistence, Price Indexation and Optimal Simple Interest Rate Rules

We study the properties of the optimal interest rate rule under different sources of inflation persistence. In our model, the optimal policy minimizes price dispersion, which depends on the degree of price indexation. When indexation is zero, inflation persistence depends only on the level of trend inflation, the inflation gap is purely forward-looking and the optimal policy targets inflation stability. Full indexation makes the inflation gap persistent, eliminates the effects of trend inflation and makes the optimal policy target the real interest rate. We compare our results with empirical estimates of the FED's policy in the post-WWII era

The Long-run Optimal Degree of Indexation in New Keynesian models with price staggering a la' Calvo

This note shows that full price indexation is not optimal in the long-run, in the New Keynesian model under trend inflation and price staggering à la Calvo. Moreover, we show that more price stickiness may increase steady state welfare, if price indexation is partial