scholarly journals Inflation in the Great Recession and New Keynesian Models

2014 ◽  
Author(s):  
Marco Del Negro ◽  
Marc Giannoni ◽  
Frank Schorfheide
Keyword(s):  
Great Recession ◽  
New Keynesian ◽  
The Great Recession ◽  
New Keynesian Models

scholarly journals Inflation in the Great Recession and New Keynesian Models

2015 ◽  
Vol 7 (1) ◽  
pp. 168-196 ◽  
Author(s):  
Marco Del Negro ◽  
Marc P. Giannoni ◽  
Frank Schorfheide
Keyword(s):  
Monetary Policy ◽  
Great Recession ◽  
Economic Activity ◽  
Financial Frictions ◽  
New Keynesian ◽  
Dsge Models ◽  
Dsge Model ◽  
Macroeconomic Variables ◽  
The Great Recession ◽  
New Keynesian Models

Several prominent economists have argued that existing DSGE models cannot properly account for the evolution of key macroeconomic variables during and following the recent Great Recession. We challenge this argument by showing that a standard DSGE model with financial frictions available prior to the recent crisis successfully predicts a sharp contraction in economic activity along with a protracted but relatively modest decline in inflation, following the rise in financial stress in 2008:IV. The model does so even though inflation remains very dependent on the evolution of economic activity and of monetary policy. (JEL E12, E31, E32, E37, E44, E52, G01)

scholarly journals The Aggregate Implications of Regional Business Cycles

Econometrica ◽  
2019 ◽  
Vol 87 (6) ◽  
pp. 1789-1833 ◽  
Author(s):  
Martin Beraja ◽  
Erik Hurst ◽  
Juan Ospina
Keyword(s):  
Business Cycles ◽  
Great Recession ◽  
Aggregate Demand ◽  
Strong Relationship ◽  
Aggregate Data ◽  
New Keynesian ◽  
Aggregate Fluctuations ◽  
Wage Dynamics ◽  
The Great Recession ◽  
Wage Stickiness

Making inferences about aggregate business cycles from regional variation alone is difficult because of economic channels and shocks that differ between regional and aggregate economies. However, we argue that regional business cycles contain valuable information that can help discipline models of aggregate fluctuations. We begin by documenting a strong relationship across U.S. states between local employment and wage growth during the Great Recession. This relationship is much weaker in U.S. aggregates. Then, we present a methodology that combines such regional and aggregate data in order to estimate a medium‐scale New Keynesian DSGE model. We find that aggregate demand shocks were important drivers of aggregate employment during the Great Recession, but the wage stickiness necessary for them to account for the slow employment recovery and the modest fall in aggregate wages is inconsistent with the flexibility of wages we observe across U.S. states. Finally, we show that our methodology yields different conclusions about the causes of aggregate employment and wage dynamics between 2007 and 2014 than either estimating our model with aggregate data alone or performing back‐of‐the‐envelope calculations that directly extrapolate from well‐identified regional elasticities.

scholarly journals Understanding the Great Recession

2015 ◽  
Vol 7 (1) ◽  
pp. 110-167 ◽  
Author(s):  
Lawrence J. Christiano ◽  
Martin S. Eichenbaum ◽  
Mathias Trabandt
Keyword(s):  
Great Recession ◽  
Economic Activity ◽  
New Keynesian ◽  
Factor Productivity ◽  
Working Capital ◽  
The Great Recession ◽  
Keynesian Model ◽  
Price Rigidities ◽  
The Cost ◽  
Joint Behavior

We argue that the vast bulk of movements in aggregate real economic activity during the Great Recession were due to financial frictions. We reach this conclusion by looking through the lens of an estimated New Keynesian model in which firms face moderate degrees of price rigidities, no nominal rigidities in wages, and a binding zero lower bound constraint on the nominal interest rate. Our model does a good job of accounting for the joint behavior of labor and goods markets, as well as inflation, during the Great Recession. According to the model the observed fall in total factor productivity and the rise in the cost of working capital played critical roles in accounting for the small drop in inflation that occurred during the Great Recession. (JEL E12, E23, E24, E31, E32, E52)

A LOOK AT THE U.S. BUSINESS CYCLES THROUGH THE LENS OF A TANK MODEL

2020 ◽  
pp. 1-19
Author(s):  
Yongseung Jung
Keyword(s):  
Great Recession ◽  
New Keynesian ◽  
Tank Model ◽  
The Great Recession ◽  
Keynesian Model ◽  
Monetary Policy Shock ◽  
Post War ◽  
The 1960S ◽  
The Cost

This paper sets up a two-agent new Keynesian model to explore the role of financial frictions over the post-war U.S. business cycle. The estimated model via maximum likelihood shows that the share of constrained households which has been substantial since the 1960s has significantly increased during the Great Recession. It also finds that the cost-push shock has been most important in explaining the behavior of the detrended output. The cost-push shock has also played a pivotal role in the fluctuation of inflation during the Great Recession, while the monetary policy shock which has been important in the behavior of inflation before the financial crisis has a negligible role during the Great Recession.

scholarly journals PROSPERITY FOR ALL: AN ASSESSMENT OF THE “FARMERIAN” REMEDIES TO PREVENT FINANCIAL CRISES AND REDUCE UNEMPLOYMENT

2017 ◽  
Vol 23 (3) ◽  
pp. 1287-1293
Author(s):  
Marco Guerrazzi
Keyword(s):  
Great Recession ◽  
Financial Crises ◽  
Research Agenda ◽  
New Keynesian ◽  
Recent Book ◽  
Policy Issues ◽  
The Great Recession

In a recent book, Roger Farmer offers a quick but exhaustive rundown of the research agenda that he drove forward over the last 10 years with the aim to offer a novel microfoundation for Keynesian macroeconomics and—as a by-product—providing practical remedies to prevent financial crises, reduce unemployment, and ensure prosperity for all. In that work, the Farmerian arguments question the conventional visions underlying the Neo-Classical and New Keynesian paradigms and the addressed topics cover relevant theoretical, empirical, and policy issues that have been widely debated after the Great Recession of 2007–2009.

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