Output Persistence from Monetary Shocks with Staggered Prices or Wages under a Taylor Rule

Sebastiano Daros () and Neil Rankin

CDMA Conference Paper Series from Centre for Dynamic Macroeconomic Analysis

Abstract: We analytically examine output persistence from monetary shocks in a DSGE model with staggered prices or wages under a Taylor Rule for monetary policy. The best known such model assumes Calvo-style staggering of prices and flexible wages and is known to yield no persistence under a Taylor Rule. Switching to Taylor-style staggering introduces lagged output into the model’s ‘New Keynesian Phillips Curve’ equation. Despite this, we show it generates no persistence, whether staggering is in wages or prices. Surprisingly, however, Calvo-style staggering of wages does generate persistence, if there are decreasing returns to labour.

Keywords: Output Persistence; Staggered Prices/Wages; Taylor Rule. (search for similar items in EconPapers)
JEL-codes: E32 E52 (search for similar items in EconPapers)
Date: 2009-05
New Economics Papers: this item is included in nep-cba, nep-lab, nep-mic and nep-mon
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Citations: View citations in EconPapers (2)

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Journal Article: Output persistence from monetary shocks with staggered prices or wages under a Taylor Rule (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:san:cdmacp:0906

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