A dynamic equilibrium model of inflation and unemployment

Greenwood, Jeremy; Huffman, Gregory W.

doi:10.1016/0304-3932(87)90047-x

Cited by 42 publications

(20 citation statements)

References 11 publications

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“…For the problem under discussion, the state variables are capital stock and the shock to technology. With regard to the range of the technology shock, it is customary in much of this literature [see, e.g., Danthine and Donaldson (1981), Mehra and Prescott (1985), and Greenwood and Huffman (1986)] to enumerate a discrete set of M possible values of )~, the probability of relative occurrence of which is governed by a prespecified M-dimensional probability transition matrix. For Hansen's (1985) technology choice, the range of the feasible capital stock levels will then be bounded above by some kma x defined by f(kmax, 1)~ = kmax, where ~ is the maximum possible shock value.…”

Section: F(kt Nt)=l[ktntl-a] ~ Pmentioning

confidence: 99%

On some computational aspects of equilibrium business cycle theory

Danthine

Donaldson

Mehra

1989

Journal of Economic Dynamics and Control

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Section: F(kt Nt)=l[ktntl-a] ~ Pmentioning

confidence: 99%

On some computational aspects of equilibrium business cycle theory

Danthine

Donaldson

Mehra

1989

Journal of Economic Dynamics and Control

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“…There is a Fisher effect but not the liquidity effect. Calibrated CIA models like in Greenwood and Huffman (1987), Christiano(1991), Christiano and Eichenbaum(1992), Hodrick, Kocherlakota and Lukas(1991) and Giovannini and Labadie(1991) all lead to this conclusion. Subsequent research aiming at correcting this counter-intuitive implication has been conducted by number of authors.…”

Section: Introductionmentioning

confidence: 88%

“…This prevailing wisdom about the working of monetary policy is by no means uncontroversial. Real business cycle (RBC) models built in a Cash-in-advance (CIA) framework, for instance, have the property that unexpected increases in the growth rate of money drive up nominal interest rates and inflation, while lowering output and employment (Greenwood and Huffman, 1987). In the CIA model, households immediately spend an unexpected increase in money on a fixed quantity of real goods.…”

Section: Introductionmentioning

confidence: 99%

On the Liquidity Effect of Monetary Policy in the CEMAC Countries: An Empirical Investigation

Samba¹

2010

IJEF

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The aim of this paper is to investigate on the effectiveness of the liquidity effect of monetary policy actions in the CEMAC region. As the conventional wisdom states, a cornerstone for the central bank to stimulate the economy is to lower interest rates by increasing the supply of narrow money. To circumvent some of the difficulties inherent to the verification of this assumption, we adopt in this study, a methodology advocated by Christiano and Eichenbaum(1991) which seems appropriate in the special case of the CEMAC countries. The results we obtain indicate that the conventional wisdom holds both on individual level and on a regional basis when the monetary aggregate measures the stance of monetary policy. Moreover, an unanticipated credit expansion causes the interest rate to decline in most of the CEMAC countries. However, both the liquidity effect and the loanable effect are offset most of the time by a price puzzle or an output puzzle. In some countries, there is also an evidence of a liquidity puzzle. On the other hand, identification assumptions based on the interest rate are unsuitable for an appropriate assessment of the liquidity effect in the region.

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“…However, there has been criticism with regard to this theory and Friedman (1968) indicated that there is no trade-off between unemployment and inflation. Greenwood and Huffman (1987) conducted a study by constructing stochastic general equilibrium model to investigate the covariance properties between inflation and unemployment upon the state of exogenous real and monetary factor; both conditioned and unconditioned. The result satisfies the validity of Philips Curve theory that there is a negative relationship between inflation and unemployment.…”

Section: Inflation Ratementioning

confidence: 99%

Impact of Macroeconomic Policy Instruments and External Shock on Unemployment Rate in Malaysia

Kaur¹,

Zaharudin²

2016

European Proceedings of Social &Amp; Behavioural Sciences

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This paper examines the impact of macroeconomic policy instruments and external shock on unemployment rate in Malaysia. Using the quarterly data from 2006(Quarter 1) to 2015 (Quarter 4) the study found that GDP growth, price of oil, broad money supply and average overnight interbank rate have significant and negative impact on unemployment rate in Malaysia. The findings of the study also indicate the existence of Okun's law which postulates A positive relationship between GDP and unemployment. Policy makers could formulate policies related to the above macroeconomic variable to enhance unemployment reduction. On the other hand, the inflation rate shows a positive effect but is not significant.

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A dynamic equilibrium model of inflation and unemployment

Cited by 42 publications

References 11 publications

On some computational aspects of equilibrium business cycle theory

On some computational aspects of equilibrium business cycle theory

On the Liquidity Effect of Monetary Policy in the CEMAC Countries: An Empirical Investigation

Impact of Macroeconomic Policy Instruments and External Shock on Unemployment Rate in Malaysia

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