Unit Total Costs: An Alternative Marginal Cost Proxy for Inflation Dynamics

Bratsiotis, George J.; Robinson, Wayne

doi:10.1017/s1365100515000140

Cited by 3 publications

(1 citation statement)

References 65 publications

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“…This dynamic system has only one dimension. It is similar to the extreme case of the New-Keynesian Phillips curve where all labor is financed by working capital so that Bratsiotis and Robinson (2016)). Future inflation is negatively correlated with the cost of working capital and not at all with the cost of labor.…”

Section: Alternative Monetary Policy Transmission Mechanismmentioning

confidence: 85%

Hopf Bifurcation From New-Keynesian Taylor Rule to Ramsey Optimal Policy

Chatelain¹,

Ralf²

2020

Macroecon. Dynam.

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This paper compares different implementations of monetary policy in a new-Keynesian setting. We can show that a shift from Ramsey optimal policy under short-term commitment (based on a negative feedback mechanism) to a Taylor rule (based on a positive feedback mechanism) corresponds to a Hopf bifurcation with opposite policy advice and a change of the dynamic properties. This bifurcation occurs because of the ad hoc assumption that interest rate is a forward-looking variable when policy targets (inflation and output gap) are forward-looking variables in the new-Keynesian theory.JEL classification numbers: C61, C62, E43, E44, E47, E52, E58.

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Section: Alternative Monetary Policy Transmission Mechanismmentioning

confidence: 85%

Hopf Bifurcation From New-Keynesian Taylor Rule to Ramsey Optimal Policy

Chatelain¹,

Ralf²

2020

Macroecon. Dynam.

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Can We Identify the Fed's Preferences?

Chatelain

Ralf

2017

SSRN Journal

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Using US data, we estimate optimal policy with a probability below one that the Fed reneges on its commitment ("limited credibility") versus discretionary policy where the Fed reneges on its commitment at all periods with a probability equal to one ("zero credibility"). The transmission mechanism is the new-Keynesian Phillips curve with auto-correlated cost-push shock. It includes the labor cost channel or the working capital channel. Discretion with zero credibility of the Fed is rejected. The working capital channel fits the data before Volcker's mandate. The labor cost channel fits the data since Volcker's mandate

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Hopf Bifurcation from New-Keynesian Taylor Rule to Ramsey Optimal Policy

Chatelain

Ralf

2017

SSRN Journal

View full text Add to dashboard Cite

This paper shows that a shift from Ramsey optimal policy under short term commitment (based on a negative-feedback mechanism) to a Taylor rule (based on positive-feedback mechanism) in the new-Keynesian model is in fact a Hopf bifurcation, with opposite policy advice. The number of stable eigenvalues corresponds to the number of predetermined variables including the interest rate and its lag as policy instruments for Ramsey optimal policy. With a new-Keynesian Taylor rule, however, these policy instruments are arbitrarily assumed to be forward-looking variables when policy targets (inflation and output gap) are forward-looking variables. For new-Keynesian Taylor rule, this Hopf bifurcation implies a lack of robustness and multiple equilibria if public debt is not set to zero for all observation

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Unit Total Costs: An Alternative Marginal Cost Proxy for Inflation Dynamics

Cited by 3 publications

References 65 publications

Hopf Bifurcation From New-Keynesian Taylor Rule to Ramsey Optimal Policy

Hopf Bifurcation From New-Keynesian Taylor Rule to Ramsey Optimal Policy

Can We Identify the Fed's Preferences?

Hopf Bifurcation from New-Keynesian Taylor Rule to Ramsey Optimal Policy

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