State Dependent Government Spending Multipliers: Downward Nominal Wage Rigidity and Sources of Business Cycle Fluctuations

Jo, Yoon Ee; Zubairy, Sarah

doi:10.2139/ssrn.4104011

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2022

2024

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“…We follow closely the model of Kim and Ruge-Murcia (2009), but focus on very different mechanisms and questions. Other recent studies that emphasize asymmetry in nominal rigidities include Benigno and Antonio-Ricci (2011), Abbritti and Fahr (2013), Daly and Hobijn (2014), Jo and Zubairy (2022). We also relate to the literature emphasizing asymmetries over the business cycle (Neftci (1984), Dupraz et al (2019), Dew-Becker et al (2021).…”

Section: Related Literaturementioning

confidence: 95%

Downward Nominal Rigidities and Bond Premia

Gourio,

Ngo

2024

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We develop a parsimonious New Keynesian macro-finance model with downward nominal rigidities to understand secular and cyclical movements in Treasury bond premia. Downward nominal rigidities create state-dependence in output and inflation dynamics: a higher level of inflation makes prices more flexible, leading output and inflation to be more volatile, and bonds to become more risky. The model matches well the relation between the level of inflation and a number of salient macro-finance moments. Moreover, we show that empirically, inflation and output respond more strongly to productivity shocks when inflation is high, as predicted by the model.

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Section: Related Literaturementioning

confidence: 95%

Downward Nominal Rigidities and Bond Premia

Gourio,

Ngo

2024

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“…6 Some recent studies explain state-dependent fiscal multipliers with downward nominal wage rigidity and incomplete markets, e.g., Shen and Yang (2018), Barnichon, Debortoli and Matthes (2022), and Jo and Zubairy (2022).…”

Section: Discrepancy 1 the Balance Sheet Policymentioning

confidence: 99%

(Un)Conventional Monetary and Fiscal Policy

Xie

2022

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State Dependent Government Spending Multipliers: Downward Nominal Wage Rigidity and Sources of Business Cycle Fluctuations

Cited by 2 publications

References 34 publications

Downward Nominal Rigidities and Bond Premia

Downward Nominal Rigidities and Bond Premia

(Un)Conventional Monetary and Fiscal Policy

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