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https://hdl.handle.net/2142/85549
Description
Title
Endogenous Shocks in the New Keynesian Model
Author(s)
Kapinos, Pavel
Issue Date
2004
Doctoral Committee Chair(s)
Juha Seppala
Department of Study
Economics
Discipline
Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Theory
Language
eng
Abstract
The New Keynesian literature has recently devoted considerable attention to endogenous shocks to the Phillips curve. One reason for such scrutiny is their ability to generate a meaningful tradeoff between inflation and the output gap without resorting to ad hoc exogenous shocks. Chapter 1 surveys three mechanisms that give rise to such endogenous shocks: the cost channel of transmission of monetary policy, nominal wage stickiness, and incomplete pass-through. With some reservations, these endogenous shocks produce the same sort of behavior of the model's variables in response to a technological shock as they would exhibit in response to an ad hoc cost-push shock. Chapters 2 and 3 consider the role of the cost channel in detailed theoretical and empirical settings. The cost channel may produce a cogent explanation to the so-called 'price puzzle', which may be discerned only from the monthly but not the quarterly data. Finally, Chapter 4 provides empirical estimates of some structural parameters that characterize the New Keynesian model with nominal wage stickiness using the generalized method of moments. One important finding is that the duration of price and nominal wage contracts may have been significantly overestimated in the previous literature.
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