News Shocks, Price Levels, and Monetary Policy

Ryo Jinnai ()

Global COE Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: This paper presents a model in which improvement in the future TFP is, on impact, associated with increases in consumption, stock prices, and real wages, and decreases in GDP, investment, hours worked, and inflation. These predictions are consistent with empirical findings of Barsky and Sims. The model features research and development, sticky nominal wages, and the monetary authority responding to inflation and consumption growth. The proposed policy rule fits the actual Federal Funds rate as closely as an alternative policy rule responding to inflation and GDP growth, and is better at reducing distortion due to the nominal wage stickiness.

Keywords: news shock; R&D; inflation; sticky wages; monetary policy (search for similar items in EconPapers)
JEL-codes: E00 E30 E52 (search for similar items in EconPapers)
Date: 2011-03
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hst:ghsdps:gd10-173

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