Policy trade-off in the long run: A new Keynesian model with technological change and money growth

Eiji Tsuzuki, Tomohiro Inoue

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

In this study, we introduce a constant rate of technological change and money growth into the standard new Keynesian model, in which both prices and nominal wages are supposed to be sticky. Using such a model, we examine whether a policy trade-off exists between curbing inflation and stabilizing the welfare-relevant output gap in the steady state. If we take only price stickiness into consideration, a policy trade-off does not occur. However, if both nominal wage stickiness and price stickiness are taken into consideration, a policy trade-off occurs.

Original languageEnglish
Pages (from-to)943-950
Number of pages8
JournalEconomic Modelling
Volume27
Issue number5
DOIs
Publication statusPublished - 2010 Sep

Keywords

  • New Keynesian Phillips curve
  • Nominal rigidities
  • Welfare-relevant output gap

ASJC Scopus subject areas

  • Economics and Econometrics

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