Sticky Prices, Limited Participation or Both?

This paper investigates the micro mechanisms by which monetary policy affects and is transmitted through the U.S economy, by developing a unified, dynamic, stochastic, general equilibrium model that nests two classes of models. The first sticky prices and the second limited participation. Limited participation is incorporated by assuming that households’ are faced with quadratic portfolio adjustment costs. Monetary policy is characterized by a generalized Taylor rule with interest rate smoothing. The model is calibrated and investigates whether the unified model performs better in replicating empirical stylized facts, than the models that have only sticky price or limited participation. The unified model replicates the second moments of the data better than the other two types of models. It also improves on the ability of the sticky price model to deliver the hump-shaped response of output and inflation. Moreover, it also delivers on the ability of the limited participation model to replicate the fall in profits and wages, after a contractionary monetary policy.

Sticky Prices vs. Limited Participation:What Do We Learn From the Data?

The method of maximum likelihood is used to estimate a Dynamic Stochastic General Equilibrium business cycle model that combines elements of existing sticky-price and limited-participation specifications. Sticky prices are incorporated, following Rotemberg (1982), by assuming that monopolistically competitive firms face a quadratic cost of nominal price adjustment. Limited participation is incorporated, following Cooley and Quadrini (1999), by assuming that households face a quadratic cost of portfolio adjustment.The results support the hypothesis that the degree of the portfolio adjustment is very small in the data, but significant. In addition, the data suggest that the response of the interest rate to deviations of output from the steady state in the interest rate rule should be very close to zero. This is argued by Christiano and Gust (1999) as well. Furthermore, as in Ireland (1999, 2000), the model can not reject the hypothesis of parameter stability for the policy parameters. On the other hand, the model rejects the hypothesis for the rest of the parametersEstimating DSGE, Sticky Prices, Limited Participation, Monetary Policy

Sticky Prices, Limited Participation, or Both?

This paper investigates the micro mechanisms by which monetary policy affects and is transmitted through the US economy, by developing a unified, dynamic, stochastic, general equilibrium model that nests two classes of models. The first sticky prices and the second limited participation. Limited participation is incorporated by assuming that households are faced with quadratic portfolio adjustment costs. Monetary policy is characterized by a generalized Taylor rule with interest rate smoothing. The model is calibrated and investigates whether the unified model performs better in replicating empirical stylized facts, than the models that have only sticky price or limited participation. The unified model replicates the second moments of the data better than the other two types of models. It also improves on the ability of the sticky price model to deliver the hump-shaped response of output and inflation. Moreover, it also delivers on the ability of the limited participation model to replicate the fall in profits and wages, after a contractionary monetary policy.Monetary policy, sticky prices, Taylor rule, DSGE model

Scheduling of non-repetitive lean manufacturing systems under uncertainty using intelligent agent simulation

World-class manufacturing paradigms emerge from specific types of manufacturing systems with which they remain associated until they are obsolete. Since its introduction the lean paradigm is almost exclusively implemented in repetitive manufacturing systems employing flow-shop layout configurations. Due to its inherent complexity and combinatorial nature, scheduling is one application domain whereby the implementation of manufacturing philosophies and best practices is particularly challenging. The study of the limited reported attempts to extend leanness into the scheduling of non-repetitive manufacturing systems with functional shop-floor configurations confirms that these works have adopted a similar approach which aims to transform the system mainly through reconfiguration in order to increase the degree of manufacturing repetitiveness and thus facilitate the adoption of leanness. This research proposes the use of leading edge intelligent agent simulation to extend the lean principles and techniques to the scheduling of non-repetitive production environments with functional layouts and no prior reconfiguration of any form. The simulated system is a dynamic job-shop with stochastic order arrivals and processing times operating under a variety of dispatching rules. The modelled job-shop is subject to uncertainty expressed in the form of high priority orders unexpectedly arriving at the system, order cancellations and machine breakdowns. The effect of the various forms of the stochastic disruptions considered in this study on system performance prior and post the introduction of leanness is analysed in terms of a number of time, due date and work-in-progress related performance metrics

Sticky Prices vs Limited Participation: What do we Learn from the Data?

The method of maximum likelihood is used to estimate a Dynamic Stochastic General Equilibrium business cycle model that combines elements of existing sticky-price and limited-participation specifications. Sticky prices are incorporated, following Rotemberg (1982), by assuming that monopolistically competitive firms face a quadratic cost of nominal price adjustment. Limited participation is incorporated, following Cooley and Quadrini (1999), by assuming that households face a quadratic cost of portfolio adjustment.The results support the hypothesis that the degree of the portfolio adjustment is very small in the data, but significant. In addition, the data suggest that the response of the interest rate to deviations of output from the steady state in the interest rate rule should be very close to zero. This is argued by Christiano and Gust (1999) as well. Furthermore, as in Ireland (1999, 2000), the model can not reject the hypothesis of parameter stability for the policy parameters. On the other hand, the model rejects the hypothesis for the rest of the parameters.