New Keynesian Economics through the Extensive Margin

Saki Bigio and Akira Ishide

No 33332, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper reformulates the New Keynesian model to incorporate output adjustments through the extensive margin. Shifting from adjustments through the intensive to the extensive employment margin, the model introduces predetermined output, altering key properties of the New Keynesian framework. First, the Taylor principle is inverted: stability is achieved when nominal rates respond less than one-for-one with inflation. Second, the model significantly alters the output responses to changes in monetary policy. We argue that this represents a challenge and an opportunity for the literature. Sticky information allows the model to correct the sign of impulse responses.

JEL-codes: E32 E51 J64 (search for similar items in EconPapers)
Date: 2025-01
Note: EFG ME
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w33332.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:33332

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w33332
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().