The macroeconomic effects of oil price shocks: Why are the 2000s so different from the 1970s?

We characterize the macroeconomic performance of a set of industrialized economies in the aftermath of the oil price shocks of the 1970s and of the last decade, focusing on the differences across episodes. We examine four different hypotheses for the mild effects on inflation and economic activity of the recent increase in the price of oil: (a) good luck (i.e. lack of concurrent adverse shocks), (b) smaller share of oil in production, (c) more flexible labor markets, and (d) improvements in monetary policy. We conclude that all four have played an important role.Great moderation, supply shocks, stagflation, monetary policy, real wage rigidities

Understanding the effects of government spending on consumption

Recent evidence on the effect of government spending shocks on consumption cannot be easily reconciled with existing optimizing business cycle models. We extend the standard New Keynesian model to allow for the presence of rule-of-thumb (non-Ricardian) consumers. We show how the interaction of the latter with sticky prices and deficit financing can account for the existing evidence on the effects of government spending. JEL Klassifikation: E32, E62

Understanding the Effects of Government Spending on Consumption

Recent evidence suggests that consumption rises in response to an increase in government spending. That finding cannot be easily reconciled with existing optimizing business cycle models. We extend the standard new Keynesian model to allow for the presence of rule-of-thumb consumers. We show how the interaction of the latter with sticky prices and deficit financing can account for the existing evidence on the effects of government spending.

The small open-economy New Keynesian Phillips Curve: empirical evidence and implied inflation dynamics

In this paper we apply GMM estimation to assess the relevance of domestic versus external determinants of CPI inflation dynamics in a sample of OECD countries typically classified as open economies. The analysis is based on a variant of the small open-economy New Keynesian Phillips Curve derived in Galí and Monacelli (Rev Econ Stud 72:707–734, 2005), where the novel feature is that expectations about fluctuations in the terms of trade enter explicitly. For most countries in our sample the expected relative change in the terms of trade emerges as the more relevant inflation driver than the contemporaneous domestic output gap

ARCH and structural breaks in United States inflation

United States Phillips curves are routinely estimated without accounting for the shifts in mean inflation. As a result we may expect the standard estimates of Phillips curves to be biased and suffer from ARCH. We demonstrate this is indeed the case. We also demonstrate that once the shifts in mean inflation are accounted for the ARCH is largely eliminated in the estimated model and the model defining expected rate of inflation in the New Keynesian model plays no significant role in the dynamics of inflation

A New Phillips Curve for Spain

En este trabajo se ha presentado evidencia de la Nueva Curva de Phillips (NCP) para la economia española durante las dos ultimas decadas (1980-1998). Algunos de los resultados alcanzados se pueden sintetizar de la siguiente forma : a) la NCP se ajusta bien a los datos de la economia españolab) todavia es importante el componente inercial implicito en la dinamica de esta variable: c) el grado de rigidez de los precios, implicito en las estimaciones, parece plausibled) la utilizacion de informacion independiente sobre precios de bienes intermedios importados (que se ve, a su vez, afectada por el tipo de cambio) afecta a la medicion de los costes marginales de las empresas y, por tanto, a la dinamica de la inflaciony, para concluir, e) las fracciones en el mercado de trabajo, tal y como se manifiesta en el comportamiento del margen salarial, parecen desempeñar un papel importante en la dinamica de los costes marginales. (jg) (ad

European inflation dynamics

Los autores presentan evidencia sobre el ajuste de la Nueva Curva de Phillips para el area del euro durante el periodo 1970-1998. Utilizan esta evidencia para comparar las caracteristicas dinamicas de la inflacion en el area del euro y en Estados Unidos. Ademas, estudian los factores determinantes de la inercia de esta variable a partir del comportamiento ciclico de los principales componentes de los costes marginales : la productividad del trabajo y los salarios reales. Entre los resultados : a) La Nueva Curva de Phillips explica los datos, en el area del euro, incluso mejor que en Estados Unidos y b) La inflacion en el area del euro parece tener una mayor componente 'forward looking' que en Estados Unidos. (ad