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

Eiji Tsuzuki and Tomohiro Inoue

Economic Modelling, 2010, vol. 27, issue 5, 943-950

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.

Keywords: Nominal; rigidities; Welfare-relevant; output; gap; New; Keynesian; Phillips; curve (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:27:y:2010:i:5:p:943-950

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