Nominal rigidities and the dynamic effects of a monetary shock

Two dynamic sticky price models with monopolistic competition in the goods market are presented. In the first model, each intermediate goods producer faces quadratic costs of adjusting its nominal price as introduced by Rotemberg (1982); the second model incorporates staggered price setting as proposed by Taylor (1980) and recently discussed by Chari/Kehoe/McGrattan (2000). Using the approximation method and the toolkit of Uhlig (1999) these models are used to derive theoretical impulse response functions. One aim is to check whether these two different forms of nominal price rigidities imply quantitatively and qualitatively different impulse response functions. Interestingly, both models do not seem to imply as much persistence as empirical impulse response functions typically indicate. However, qualitative differences do exist.

The Role of Money Demand in a Business Cycle Model with Staggered Wage Contracts

The question of the main determinants of persistent responses due to nominal shocks captures, at least since Chari et al. (2000), a major part of the recent macroeconomic debate. However, the question whether sticky wages and/or sticky prices are sufficient for persistent reactions of key economic variables remains open. In the present model we allow for nominal rigidities due to Taylor- like wage setting as well as price adjustment costs. However, as our analysis illustrates, smoothing marginal costs seems crucial to derive a contract multiplier, wage staggering alone is not sufficient. Without considering a more specific analysis of factor market frictions, we enforce a point made by Erceg (1997) by analyzing the structure of money demand. In particular, we analyze a `standard' consumption based money demand function by varying the interest rate elasticity of money demand as well as the steady state rate of money holdings. Our results show that the persistency of the output/price dynamics can be affected crucially by the form of the implicit money demand function. In particular, it is shown that staggered wage contracts have to be accompanied by a sufficiently low interest rate elasticity, otherwise the model fails to reproduce reasonable responses of real variables.Monetary Policy Shocks, Sticky Prices, Staggered Wages, Money Demand

Robust monetary policy in a new Keynesian model with imperfect interest rate pass-through

We use robust control to study how a central bank in an economy with imperfect interest rate pass-through conducts monetary policy if it fears that its model could be misspecified. The effects of the central bank's concern for robustness can be summarised as follows. First, depending on the shock, robust optimal monetary policy under commitment responds either more cautiously or more aggressively. Second, such robustness comes at a cost: the central bank dampens volatility in the inflation rate preemptively, but accepts higher volatility in the output gap and the loan rate. Third, if the central bank faces uncertainty only in the IS equation or the loan rate equation, the robust policy shifts its concern for stabilisation away from inflation. --optimal monetary policy,commitment,model uncertainty

Search Unemployment in a Dynamic New Keynesian Model of the Business Cycle

The monetary transmission mechanism plays an important role in studying the effects of monetary policy on the real side of the economy. At least since Chari et al. (2000) it is generally accepted that new keynesian models of the business cycle display a "persistence" problem. In this paper, we follow the approach of Walsh (2002) and include search unemployment in a dynamic new keynesian model of the business cycle in order to study the effects of a monetary shock. After deriving the equilibrium solution of the model, we study the behavior of the impulse response functions due to a monetary shock. To complete our analysis we confront the results of our simulation to time series data for the U.S., U.K. and Germany. Our main result is that the introduction of search unemployment does improve the capability of the model to reproduce some stylized facts of the monetary transmission mechanism, however to a less extent than expected.Search Unemployment, Monetary Shocks, Business Cycles

Nominal rigidities and the dynamic effects of a monetary shock

Two dynamic sticky price models with monopolistic competition in the goods market are presented. In the first model, each intermediate goods producer faces quadratic costs of adjusting its nominal price as introduced by Rotemberg (1982); the second model incorporates staggered price setting as proposed by Taylor (1980) and recently discussed by Chari/Kehoe/McGrattan (2000). Using the approximation method and the toolkit of Uhlig (1999) these models are used to derive theoretical impulse response functions. One aim is to check whether these two different forms of nominal price rigidities imply quantitatively and qualitatively different impulse response functions. Interestingly, both models do not seem to imply as much persistence as empirical impulse response functions typically indicate. However, qualitative differences do exist

More or less aggressive? Robust monetary policy in a New Keynesian model with financial distress

This paper investigates the optimal monetary policy response to a shock to collateral when policymakers act under discretion and face model uncertainty. The analysis is based on a New Keynesian model where banks supply loans to transaction constrained consumers. Our results confirm the literature on model uncertainty with respect to a cost-push shock. Insuring against model misspecification leads to a more aggressive policy response. The same is true for a shock to collateral. A preference for robustness leads to a more aggressive policy. Increasing the weight attached to interest rate smoothing raises the degree of aggressiveness. Our results indicate that a preference for robustness crucially depends on the way different types of disturbances affect the economy: in the case of a shock to collateral the policymaker does not need to be as much worried about model misspecification as in the case of a conventional cost-push shock. --Optimal monetary policy,discretion,model uncertainty,banking,collateral

More or less aggressive? Robust monetary policy in a New Keynesian model with financial distress

This paper investigates the optimal monetary policy response to a shock to collateral when policymakers act under discretion and face model uncertainty. The analysis is based on a New Keynesian model where banks supply loans to transaction constrained consumers. Our results confirm the literature on model uncertainty with respect to a cost-push shock. Insuring against model misspecification leads to a more aggressive policy response. The same is true for a shock to collateral. A preference for robustness leads to a more aggressive policy. Increasing the weight attached to interest rate smoothing raises the degree of aggressiveness. Our results indicate that a preference for robustness crucially depends on the way different types of disturbances affect the economy: in the case of a shock to collateral the policymaker does not need to be as much worried about model misspecification as in the case of a conventional cost-push shock

Unravelling the sex-specific diversity and functions of adrenal gland macrophages

Despite the ubiquitous function of macrophages across the body, the diversity, origin, and function of adrenal gland macrophages remain largely unknown. We define the heterogeneity of adrenal gland immune cells using single-cell RNA sequencing and use genetic models to explore the developmental mechanisms yielding macrophage diversity. We define populations of monocyte-derived and embryonically seeded adrenal gland macrophages and identify a female-specific subset with low major histocompatibility complex (MHC) class II expression. In adulthood, monocyte recruitment dominates adrenal gland macrophage maintenance in female mice. Adrenal gland macrophage sub-tissular distribution follows a sex-dimorphic pattern, with MHC class IIlow macrophages located at the cortico-medullary junction. Macrophage sex dimorphism depends on the presence of the cortical X-zone. Adrenal gland macrophage depletion results in altered tissue homeostasis, modulated lipid metabolism, and decreased local aldosterone production during stress exposure. Overall, these data reveal the heterogeneity of adrenal gland macrophages and point toward sex-restricted distribution and functions of these cells.</p