On the Output-Inflation Relationship when Price and Quantity Adjustments are Costly

A vast literature analyzes the real effects of price-adjustment costs assuming that quantity adjustments are costless. In this paper, we analyze whether the presence of quantity-adjustments costs, which presumably are significant, change the traditional results on the impact of inflation. In particular, recent findings suggest that quantity-adjustment costs may remove the linkage between output and inflation. We show that this is not the case when inflation is anticipated. On the contrary, quantity-adjustment costs may significantly amplify the consequences of price-adjustment costs. Une vaste littérature analyse les effets réels de coûts d'ajustement des prix en supposant que les ajustements de quantités sont sans coûts. Dans ce papier, nous analysons si la présence de coûts d'ajustement des quantités, qui sont probablement significatifs, change le résultat traditionnel sur l'impact de l'inflation. En particulier, des résultats récents suggèrent que les coûts d'ajustement des quantités peuvent supprimer le lien entre inflation et production. Nous montrons que cela n'est pas le cas lorsque l'inflation est anticipée. Au contraire, les coûts d'ajustement des quantités peuvent amplifier significativement les conséquences des coûts d'ajustement des prix.Output-Inflation Relationship, Menu Costs, Quantity-Adjustment Costs

Optimal Workfare in Unemployment Insurance

Most workers are only partially insured against unemployment. One reason is that high unemployment compensation creates a free rider problem when monitoring of job search behavior is limited; people who do not seek employment (non-workers) may nevertheless collect unemployment compensation. We show that unproductive workfare for unemployed workers may improve unemployment insurance if workers and non-workers value leisure differently. If they differ only with respect to productivity workfare has to be based on a productivity related task requirement (task workfare); a simple time requirement (time workfare) is not enough. Task workfare is simply a better screening device, also implying that task workfare Pareto dominates time workfare. Finally, we show that the scope for using workfare is larger the smaller are the transfers from workers to non-workers.workfare; unemployment insurance

On the Output-Inflation Relationship when Price and Quantity Adjustments are Costly

A vast literature analyzes the real effects of price-adjustment costs assuming that quantity adjustments are costless. In this paper, we analyze whether the presence of quantity-adjustments costs, which presumably are significant, change the traditional results on the impact of inflation. In particular, recent findings suggest that quantity-adjustment costs may remove the linkage between output and inflation. We show that this is not the case when inflation is anticipated. On the contrary, quantity-adjustment costs may significantly amplify the consequences of price-adjustment costs.Output-inflation relationship, menu costs, quantity-adjustment costs

Rebalancing Unemployment Benefits in a Unionized Labour Market.

The basic trade union model is extended to allow for a more sophisticated unemployment benefit system consisting of two benefit levels, one for short-term and one for long-term unemployed, and a rule determining whether an unemployed is short- or long-term. The purpose of this extension is twofold; to get a more realistic analysis of the actual benefit systems in most countries, and to analyse alternative reforms to the traditional one of changing a uniform benefit level. Reforms that rebalance the benefit rates holding constant either expected utility of an unemployed, aggregate benefit expenditures, or aggregate utility of union members can reduce unemployment.

The Role of Taxes as Automatic Destabilizers in New Keynesian Economics

This paper analyses the effects of taxation in New Keynesian economics. The results show that taxes contribute to price and wage stickiness and, moreover, that the resulting fluctuations in welfare are magnified by the presence of taxes. These results are at odds with the old Keynesian idea of automatic stabilizers.New Keynesian economics, taxation, automatic stabilizersJEL Classification: E32, E62

Adaptive Regularization in Neural Network Modeling

. In this paper we address the important problem of optimizing regularization parameters in neural network modeling. The suggested optimization scheme is an extended version of the recently presented algorithm [24]. The idea is to minimize an empirical estimate -- like the cross-validation estimate -- of the generalization error with respect to regularization parameters. This is done by employing a simple iterative gradient descent scheme using virtually no additional programming overhead compared to standard training. Experiments with feed-forward neural network models for time series prediction and classification tasks showed the viability and robustness of the algorithm. Moreover, we provided some simple theoretical examples in order to illustrate the potential and limitations of the proposed regularization framework. 1 Introduction Neural networks are flexible tools for time series processing and pattern recognition. By increasing the number of hidden neurons in a 2-layer architec..

A Note on Blanchard and Kiyotaki (1987).

This note reconsiders the private losses and welfare effects of a monetary expansion obtained in the seminal Blanchard \& Kiyotaki (1987) article. In the original article it is argued that the welfare ''dependence is a complex one''. Therefore, the authors only present some numerical examples. On the contrary, this note argues that the dependence is relatively simple. It is even possible to derive unambiguous comparative static results. Furthermore, it is shown that figures on both private losses and welfare effects reported in Table 1 and 2 of the article are wrong and new figures are reported.