the early history of modern ecological economics abstract this paper provides a historical perspective for the discussion on ecological economics as a special field of research by studying the historical background of ecological economics the present discussions and tensions inside the field might become easier to understand and to relate to the study is inspired by other studies of the emergence of new research areas done by sociologists and historians of science and includes both cognitive and social aspects macro trends and the role of individuals the basis for the paper is a combination of literature studies and interviews with key researchers from the field the story opens with the emergence of the new environmental agenda in the 1960s which was influenced by the scientific development in biology and ecology then it is outlined how the environmental challenge was met by economics in the 1960s around 1970 the basic ideas of ecological economics were given modern formulations but it took a long gestation period from the beginning of the 1970s to the end of the 1980s before ecological economics took shape during this gestation period the personal relationships between the actors were formed and the meetings that were decisive for the formal establishment of ecological economics took place

prices and quantities unsustainable consumption and the global economy abstract the ecological unsustainability of current consumption patterns is now well documented one aspect of this problem which has not been sufficiently addressed is the growth of excess consumption driven by falling goods prices the index of department store prices have fallen substantially since the early 1990s in large part because global capital mobility and excess global labor supply has allowed firms to depress wages and avoid paying environmental costs consumers have responded by purchasing increasing numbers of these artificially cheap goods the example of apparel is discussed in some detail and data from other goods categories are presented these trends suggest that achieving sustainable consumption in the us is not only a technical issue but will also involve fundamental changes in the global political economy to eliminate the artificially low prices of imported goods

supply shocks and monetary policy revisited written almost a decade after the first attempts in 1974 to develop a theory of policy response to supply shocks this paper uses a simple algebraic framework to summarize the central issues posed by supply shocks for macroeconomic policy primary emphasis goes to the case for and against monetary accommodation on the nature and extent of wage indexation and on the distinction between permanent and transitory shocks given the difficult tradeoffs faced by monetary policy makers supply side alternatives may represent the best available policy options 20 references

inflation dynamics and real marginal costs new evidence from u s manufacturing industries this paper deals with the analysis of price setting in u s manufacturing industries recent studies have heavily criticized the ability of the new keynesian phillips curve nkpc to t aggregate in ation see e g rudd and whelan 2006 can rational expectations sticky price models explain in ation dynamics american economic review vol 96 1 pp 303 320 we challenge this evidence showing that forward looking behavior as implied by the new keynesian model of price setting is widely supported at the sectoral level in fact current and expected future values of the income share of intermediate goods emerge as

why has u s inflation become harder to forecast we examine whether the u s rate of price inflation has become harder to forecast and to the extent that it has what changes in the inflation process have made it so the main finding is that the univariate inflation process is well described by an unobserved component trend cycle model with stochastic volatility or equivalently an integrated moving average process with time varying parameters this model explains a variety of recent univariate inflation forecasting puzzles and begins to explain some multivariate inflation forecasting puzzles as well

the neoclassical trojan horse of steady state economics the vision of a steady state economy elaborated by herman daly describes an economy that uses materials and energy within the regenerative and assimilative limits of the planet s ecosystems sustainable scale just distribution and efficient allocation are its constitutive theoretical goals this paper is a critique of the theoretical foundations of steady state economics it argues that steady state economics consists in an attempt to squeeze neoclassical economics into a biophysical and ethical corset as a result many fundamental flaws and criticisms of neoclassical economics remain as a consequence steady state economics does not lead to a radical departure from or improvement upon neoclassical theory but rather to fundamental internal inconsistencies between the old economics paradigm and new progressive ecological economic thinking contradictions appear at various levels ranging from ontology and methodology to theory and values as daly has pioneered the foundations of ecological economics with his thinking these ambiguities are not only problematic for steady state economics but ecological economics as a field more generally the paper concludes that ecological economics has to let go of neoclassical foundations as they contradict its core values and ambitions a new and consistent theory of political economy of the environment along heterodox lines is needed

a coevolutionary framework for analysing a transition to a sustainable low carbon economy this paper proposes a coevolutionary framework for analysing a transition to a sustainable low carbon economy based on the coevolution of ecosystems technologies institutions business strategies and user practices within a multi level micro meso macro perspective this builds on and develops previous coevolutionary analyses of long term technological and industrial change and recent renewed interest within ecological economics on coevolutionary approaches previous work has analysed how the coevolution of technologies and institutions has led to the lock in of current high carbon energy systems and how the coevolution of physical and social technologies and business strategies has brought significant material and welfare benefits to the minority of the world s population living in industrialised countries the coevolutionary framework proposed here may be used to undertake 1 detailed empirical analyses at a micro meso level of the challenges relating to the innovation and adoption of particularly low carbon technologies 2 as a framework for analysing the multi level interaction of social and technological elements within potential transition pathways to a low carbon energy system 3 to assess the implications for economic growth and prosperity of a transition to a low carbon economy and 4 to assist in the development of more formal multi level evolutionary economic models

trends in the development of ecological economics from the late 1980s to the early 2000s abstract as the contributions to ecological economics are very diverse recent years have seen some discussion on both how to delimit the field and in which direction it should develop the intention with this paper is to contribute to the discussion by outlining important trends in the development of the field from the late 1980s to the early 2000s the study is inspired by other studies in the sociology and history of science in particular by the theoretical framework regarding scientific fields as reputational organizations which draws attention to both cognitive and social aspects of the formation of a field the basis for the paper is a combination of literature studies interviews with key researchers in the field and participant observations the paper outlines the characteristic cognitive features of ecological economics at the time of the birth of the field it is then described how the development in ecological economics was influenced by broader social factors during the following years and how the field was shaped by the inflow and outflow of different groups of researchers the emergence of different research programmes is outlined as is the organizational development finally the characteristics of ecological economics are summarized and the future prospects are briefly assessed

the nature of heterodox economics heterodoxy serves as an umbrella term to cover the coming together of separate projects or traditions in answering the question what distinguishes heterodoxy from the orthodoxy the author argues that matters of ontology are central in answering the question how are the various traditions that make up the modern heterodoxy to be distinguished from each other the author defends criteria other than varying commitments to specific substantive theories policy measures or techniques or basic units of analysis

disaggregate evidence on spanish inflation persistence this article investigates the degree of persistence of different inflation rates for the spanish economy using the consumer price index cpi for the aggregate as well as for the regions provinces

the time varying nairu and its implications for economic policy the nairu the unemployment rate consistent with a constant rate of inflation is estimated in this paper as a parameter allowed to vary over time value is determined in an econometric model where the inflation rate depends on its past values demand and supply shocks the nairu estimated for the gdp deflator varies over the past forty years within 5 4 to 6 5 percent its estimated value for the most recent quarter 1996 q2 is 5 6 percent the nairu has declined in recent years in response to global competition immigration other factors weakening labor s bargaining position and the rapidly declining prices of computers and other electronics

openness imperfect exchange rate pass through and monetary policy abstract this paper analyses the implications of imperfect exchange rate pass through for optimal monetary policy in a linearised open economy dynamic general equilibrium model calibrated to euro area data imperfect exchange rate pass through is modelled by assuming sticky import price behaviour the degree of domestic and import price stickiness is estimated by reproducing the empirical identified impulse response of a monetary policy and exchange rate shock conditional on the response of output net trade and the exchange rate it is shown that a central bank that wants to minimise the resource costs of staggered price setting will aim at minimising a weighted average of domestic and import price inflation

a quantitative comparison of sticky price and sticky information models of price setting i estimate sticky price and sticky information models of price setting for the united states via maximum likelihood techniques reaching several conclusions first the sticky price model fits best and captures inflation dynamics as well as reduced form equations once hybrid behavior is allowed second the importance of hybrid behavior in sticky price models is potentially consistent with a role for some information imperfections such as sticky information as a complement to nominal price rigidities finally the favorable results herein for the hybrid sticky price model when evaluated by statistics that summarize the relative fit of different models is consistent with the existing literature that is both supportive and dismissive of such models as this literature has largely ignored fit in evaluating such models many previous studies have focused on ancillary issues such as the standard errors associated with certain parameters or granger causality tests that may not provide much information about sticky price models

new measures of the output gap based on the forward looking new keynesian phillips curve abstract forward looking versions of the new keynesian phillips curve imply that the output gap the deviation of the actual output from its natural level due to nominal rigidities drives the dynamics of inflation relative to expected inflation we exploit this to set up a bivariate unobserved component model for extracting new estimates of the output gap in the us the gap estimates are large and persistent even after allowing for correlated trend and cycle shock we then augment our model to use the information in the unemployment rate the estimates confirm the presence of a large and persistent cyclical component

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

the new keynesian phillips curve endogeneity and misspecification the wrong or insignificant sign of the forcing variable in the new keynesian phillips curve estimations may be a result of the endogeneity of the labour share and misspecification of real marginal cost in the baseline model we address the misspecification of real marginal cost by formulating a broad measure that features the labour share output gap and supply shock variables the endogeneity of the labour share is addressed by using an appropriate lag of the labour share in the phillips curve reduced form evidence from five developed and five emerging market economies support the empirical validity of the nkpc

the cyclical relationship between output and prices an analysis in the frequency domain research showing a negative correlation between output and prices has brought into question the conventional wisdom that prices are procyclical however this finding has been shown to be sensitive to the sample period considered this paper examines the relationship in the frequency domain the covariance of output and prices is decomposed into spectral components to investigate whether differences in the price output relationship across sample periods reflect changes in the importance of various frequencies embedded within the correlations or whether they reflect more fundamental changes in the entire spectral relationship some implications for model evaluation are also considered

the un importance of forward looking behavior in price specifications the seminal work of edmund s phelps 1978 john b taylor 1980 and guillermo a calvo 1983 developed forward looking models of price determination that imparted inertia to the price level these models incorporate expectations of future prices and excess demand by imposing constraints typically lag lead symmetry constraints that force future variables to enter the specification in this paper the author tests the empirical significance of future prices in specifications like those of taylor he finds that expectations of future prices are empirically unimportant in explaining price and inflation behavior however the dynamics of a model that includes a purely backward looking inflation specification differ substantially and not altogether pleasingly from those with a forward looking specification copyright 1997 by ohio state university press

an open economy new keynesian phillips curve for the u k abstract we estimate a pricing equation or new keynesian phillips curve nkpc obtained from a structural dynamic model of price setting based on rotemberg 1982 sticky prices in the united states journal of political economy 90 6 1187 1211 and extended to capture employment adjustment costs and the openness of the united kingdom this model nests the baseline gali and gertler 1999 inflation dynamics a structural econometric analysis quarterly journal of economics 110 127 159 and sbordone 2002 prices and unit labor costs a new test of price stickiness journal of monetary economics 49 265 292 relationship between inflation and marginal cost in the limiting case of no employment adjustment costs no impact of relative prices of imported inputs on real marginal cost and a constant equilibrium markup our findings indicate that each of our modifications to the baseline nkpc model is important for u k data so that inflation in the u k is explained both by changes in employment and by changes in real import prices in general and real oil prices in particular external competitive pressures also seem to affect u k inflation via their impact on the equilibrium price markup of domestic firms

inflation and unemployment the world economy today is vastly different from the 1930s when seymour harris the chairman of this meeting infected me with his boundless enthusiasm for economics and his steadfast confidence in its capacity for good works economics is very different too both the science and its subject have changed and for the better since world war ii but there are some notable constants unemployment and inflation still preoccupy and perplex economists statesmen journalists housewives and everyone else the connection between them is the principal domestic economic burden of presidents and prime ministers and the major area of controversy and ignorance in macroeconomics i have chosen to review economic thought on this topic on this occasion partly because of its inevitable timeliness partly because of a personal interest reaching back to my first published work in 1941

asymmetric size dependent effects of the output gap on inflation us evidence from the last half a century this article examines asymmetric size and sign dependent effects of the output gap on the us quarterly inflation rate using data from the last half a century 1959q2 2013q1 consistent with previous studies it is found that the consumer price index is cointegrated with the unit labour cost and the price of oil a short run dynamic model is then estimated in which variations in the output gap are divided into three groups large positive large negative and small medium positive negative the results provide convincing evidence that only sufficiently large positive or negative variations of the output gap can significantly influence inflation put otherwise relatively small to medium changes in the output gap exert no significant impact on inflation and if not separated they can somewhat obscure the significant effects associated with large variations of the output gap this study can lead to greater consensus on the inflation output gap nexus the findings remain robust despite the use of differen

nexus between economic sanctions and inflation a case study in iran abstractconventional studies have applied dummy variables to analyse the relationship between economic sanctions and inflation while we construct an index which is called trade financial sanctions

econ 101 in need of a sustainability transition abstract ecological economics was one of the first of a number of scientific communities to develop transdisciplinary understandings of the sustainability challenges faced by society as a field with economics in its name ecological economics differs from the other communities and should face the particular task of contributing to the development of a new economics for economics to promote sustainability transitions it is not enough to call for more pluralism a new basic structure of economic knowledge should be developed in order to provide the foundation for a sustainability transition to econ 101 this paper argues that the performativity of economics needs to change and proposes a way of structuring econ 101

modeling inflation dynamics a critical review of recent research in recent years a broad academic consensus has arisen around the use of rational expectations sticky price models to capture inflation dynamics these models are seen as providing an empirically reasonable characterization of observed inflation behavior once suitable measures of the output gap are chosen and moreover are perceived to be robust to the lucas critique in a way that earlier econometric models of inflation are not we review the principal conclusions of this literature concerning 1 the ability of these models to fit the data 2 the importance of rational forward looking expectations in price setting and 3 the appropriate measure of inflationary pressures we argue that existing rational expectations sticky price models fail to provide a useful empirical description of the inflation process especially relative to traditional econometric phillips curves of the sort commonly employed for policy analysis

the approach of ecological economics this paper discusses the major tenets of ecological economics including value pluralism methodological pluralism and multi criteria policy assessment ecological economics offers viable alternatives to the theoretical foundations and policy recommendations of neoclassical welfare economics a revolution in neoclassical economics is currently taking place and the core assumptions of welfare economics are being replaced with more realistic models of consumer and firm behaviour this paper argues that these new theoretical and empirical findings are largely ignored in applied work and policy applications in environmental economics as the only heterodox school of economics focusing on the human economy both as a social system and as one imbedded in the biophysical universe and thus both holistic and scientifically based ecological economics is poised to play a leading role in recasting the scope and method of economic science

towards a political theory of the firm abstract the revenues of large companies often rival those of national governments and some companies have annual revenues higher than many national governments among the largest corporations in 2015 some had private security forces that rivaled the best secret services public relations offices that dwarfed a us presidential campaign headquarters more lawyers than the us justice department and enough money to capture through campaign donations lobbying and even explicit bribes a majority of the elected representatives the only powers these large corporations missed were the power to wage war and the legal power of detaining people although their political influence was sufficiently large that many would argue that at least in certain settings large corporations can exercise those powers by proxy yet in economics the commonly prevailing view of the firm ignores all these elements of politics and power we must recognize that large firms have considerable power to influence the rules of the

the history of the phillips curve consensus and bifurcation while the early history of the phillips curve up to 1975 is well known less well understood is the post 1975 fork in the road the left fork developed a theory of policy responses to supply shocks in the context of price stickiness in the non shocked sector its econometric implementation interacts shocks with backward looking inertia the right fork approach emphasizes forward looking expectations that can jump in response to anticipated policy changes the left fork approach is better suited to explaining the postwar us inflation process while the right fork approach is essential for understanding behaviour in economies with unstable macroeconomic environments the history of the phillips curve pc has evolved in two phases before and after 1975 with a widespread consensus about the pre 1975 evolution which is well understood bifurcation begins in 1975 when the pc literature split down two forks of the road with little communication or interaction between the two forks the major contribution of this paper and hence the source of bifurcation in its subtitle is to examine contrast and test the contributions of the two post 1975 forks the pre 1975 history is straightforward and is covered in section i the initial discovery of the negative inflation unemployment relation by phillips popularized by samuelson and solow was followed by a brief period in which policy makers assumed that they could exploit the trade off to reduce unemployment at a small cost of additional inflation then the natural rate revolution of friedman phelps and lucas overturned the policy exploitable trade off in favour of long run monetary neutrality those who had implemented the econometric version of the trade off pc in the 1960s reeled in disbelief when sargent demonstrated the logical failure of their test of neutrality and finally were condemned to the wreckage of keynesian economics by lucas and sargent following the twist of the inflation unemployment correlation from negative in the 1960s to positive in the 1970s the architects of neutrality and the opponents of the keynesian trade off emerged triumphant with two major caveats that their own models based on information barriers were unconvincing and that their core result that business cycles were driven by monetary or price surprises floundered without supporting evidence after 1975 the evolution of the pc literature split in two directions each of which has largely failed to recognize the other s contributions section ii reviews the left fork of the road the revival of the pc trade off in a coherent and integrated dynamic aggregate supply and demand framework that emerged in the late 1970s in econometric tests in theoretical contributions and in intermediate macro textbooks this approach which i have called mainstream is resolutely keynesian because the inflation rate is dominated by persistence and inertia in the form of long lags on past inflation an important difference between the mainstream approach and other post 1975 developments is that the role of past inflation is not limited to the formation of expectations but also includes a pure persistence effect due to fixed duration wage and price contracts and lags between

what do technology shocks tell us about the new keynesian paradigm abstract researchers have used unanticipated changes to monetary policy to identify preference and technology parameters of macroeconomic models this paper uses changes in technology to identify the same set of parameters estimates based on technology shocks differ substantially from those based on monetary policy shocks in the post world war ii united states a positive technology shock reduces inflation and increases hours worked significantly and rapidly in both cases relative to policy shock identification technology shock identification implies i long duration durability in preferences instead of short duration habit ii built in inflation inertia disappears and price flexibility increases in response to technological improvement consumption durability increases hours worked because households temporarily increase labor supply to accumulate durables towards a new higher steady state level limited nominal rigidities allow inflation to fall because firms are able to immediately cut prices when households labor supply increases finally we consider alternative data constructions and econometric specifications we find that i and or ii hold in nearly every case

on smart sanctions abstract we construct a game theoretic model of an oligarchic economy that potentially could be targeted by smart international sanctions oligarchs in this economy provide support for their leader a strong man and potentially an autocrat in return for favors that results in having income higher than the average income in the country we derive the conditions under which smart sanctions lead to compliance by the target country moreover we draw some comparison between the effectiveness of smart and dumb sanctions for these economies

what happened to the oil price macroeconomy relationship abstract strong evidence is found that oil prices no longer granger cause many u s macroeconomic indicator variables in data after 1973 a number of potential explanations are explored that sample stability issues are responsible that oil prices are now endogenous and that linear and symmetric specifications misrepresent the form of the oil price interaction none of these hypotheses are supported by the data the opec price increases do appear to have had significant impacts while the effects of the price declines of the 1980s are smaller and harder to characterize these results have potentially important implications for the large body of research which utilizes oil prices as an instrumental or explanatory variable

relative price changes as aggregate supply shocks this paper proposes a theory of supply shocks or shifts in the short run phillips curve based on relative price changes and frictions in nominal price adjustment when price adjustment is costly firms adjust to large shocks but not to small shocks and so large shocks have disproportionate effects on the price level therefore aggregate inflation depends on the distribution of relative price changes inflation rises when the distribution is skewed to the right and falls when the distribution is skewed to the left we show that this theoretical result explains a large fraction of movements in postwar u s inflation moreover our model suggests measures of supply shocks that perform better than traditional measures such as the relative prices of food and energy

identifying the new keynesian phillips curve phillips curves are central to discussions of inflation dynamics and monetary policy the hybrid new keynesian phillips curve nkpc describes how past inflation expected future inflation and a measure of real aggregate demand drive the current inflation rate this paper studies the potential weak identification of the nkpc under generalized method of moments and traces this syndrome to a lack of higher order dynamics in exogenous variables we employ analytic methods to understand the economics of the nkpc identification problem in the canonical three equation new keynesian model we revisit the empirical evidence for the usa the uk and canada by constructing tests and confidence intervals based on the anderson and rubin 1949 statistic which is robust to weak identification we also apply the guggenberger and smith 2008 lm test to the underlying nkpc pricing parameters both tests yield little evidence of forward looking inflation dynamics copyright 2008 john wiley sons ltd

impacts of the us trade and financial sanctions on iran this article presents a case study of the effectiveness of the us unilateral trade and financial sanctions on iran to assess the trade sanctions effect the us iran historical trade data are examined and the economic cost of trade sanctions is measured by applying the concept of welfare loss the financial sanctions impacts are evaluated by assessing the extra charges iran has paid on its foreign debt obligations and for financing its oil development projects at the end the efficacy of the us sanctions policy towards iran is evaluated it is found that the financial sanctions have had a more powerful impact than the trade sanctions the analysis also shows that the unilateral import sanctions on the fungible crude oil have been ineffective it is concluded that overall the sanctions economic effect has been significant while its political effect has been minimal this article suggests that targeting the sanctions towards the ruling clergy can improve their effectiveness while lessening their side effects on the iranian population precise smart sanctions to force the ruling clerics to step down will calm down islamic fundamentalisms throughout the region and will contribute to peace and better relations with the west

european inflation dynamics abstract we provide evidence on the fit of the new phillips curve npc for the euro area over the period 1970 1998 and use it as a tool to compare the characteristics of european inflation dynamics with those observed in the u s we also analyze the factors underlying inflation inertia by examining the cyclical behavior of marginal costs as well as that of its two main components namely labor productivity and real wages some of the findings can be summarized as follows a the npc fits euro area data very well possibly better than u s data b the degree of price stickiness implied by the estimates is substantial but in line with survey evidence and u s estimates c inflation dynamics in the euro area appear to have a stronger forward looking component i e less inertia than in the u s d labor market frictions as manifested in the behavior of the wage markup appear to have played a key role in shaping the behavior of marginal costs and consequently inflation in europe

identification issues in forward looking models estimated by gmm with an application to the phillips curve limited information methods are commonly used to estimate forward looking models with rational expectations such as the new keynesian phillips curve of gal and gertler 1999 in this paper we address issues of identiflcation that have been overlooked due to the incompleteness of the single equation formulation we show that problems of weak instruments may arise depending on the properties of the exogenous variables and that they are empirically relevant we also uncover a link between identiflcation and dynamic mis speciflcation and examine the lack of power of hansen s 1982 j test to detect invalid over identifying restrictions with regards to the new phillips curve we flnd that problems of identiflcation cannot be ruled out and they deserve further attention

the ultrasocial origin of the anthropocene abstract the current geological epoch has been dubbed the anthropocene the age of humans we argue that the roots of the anthropocene lie in the agricultural revolution that began some 8000 years ago unique human psychological and cultural characteristics were present in our distant hunter gatherer past but in terms of the biophysical impact of our species agricultural represented an unequivocal and decisive evolutionary break with the transition to agriculture human society began to function as a superorganism functioning as a single unit designed by social natural selection to produce economic surplus where environmental conditions were permitted early human agricultural societies followed the same pattern as a few social insects and exhibited explosive population growth complex and detailed division of labor intensive resource exploitation territorial expansion and a social organization favoring the survival and growth of the supergroup over the well being of individuals within the group similar economic forces lie behind ultrasociality in social insects and humans increased productivity from the division of labor increasing returns to scale and the exploitation of stocks of productive resources exploring the evolutionary mechanisms behind ultrasociality offers insights into the growth imperative that threatens the stability of the earth s life support systems

history lessons sanctions neither war nor peace this paper surveys the increasing international use of sanctions over the past century sanctions are a form of action taken by one state or by collective action to influence another state to change its behavior as a substitute for welfare they generally involve restrictions on foreign trade either of all goods or of specific commodities sanctions have generally been imposed by larger countries on smaller countries sanctions have had a mixed success rate depending on the costs imposed on the targeted nation their response to these costs and the impact on the economy and public opinion in other nations

supply side refinements and the new keynesian phillips curve abstract we consider the empirical consequences for generalized method of moments gmm estimates of the new keynesian phillips curve nkpc of allowing for a more refined supply side than conventionally postulated under our production structure both labor share and the output gap explain inflation dynamics

does anticipated monetary policy matter an econometric investigation a heated debate has arisen over the policy ineffectiveness proposition associate with the work of lucas sargent and wallace it postulates that anticipated aggregate demand policy will have no effect on business cycle fluctuations so that one deterministic feedback policy rule is as good as any other from the point of view of stabilizing the economy this paper develops a methodology for empirically analyzing rational expectations models displaying this neutrality result and then applies it to the important question of whether anticipated monetary policy matters to the business cycle

what is new keynesian economics this research was supported by the national science foundation i am grateful to george williams for help with the data and to steven allen laurence ball olivier j blanchard timothy bresnahan charles calomiris dennis carlton robert chirinko russell cooper stanley fischer herschel grossman r glenn hubbard david laidler john leahy assar lindbeck n gregory mankiw david romer julio rotemberg dennis snower john taylor andrew weiss and two anonymous referees for comments on one or more earlier drafts i am also indebted to michael parkin and edmund s phelps for helping to establish the etymology of the phrase new keynesian

new tests of the new keynesian phillips curve abstract lagged dependent variables typically play an important role in empirical models of inflation do these lags reflect backward looking inflation expectations or do they proxy for rational forward looking expectations as in the new keynesian phillips curve gali and gertler 1999 inflation dynamics a structural econometric analysis journal of monetary economics 44 195 222 attempt to answer this question using gmm to estimate specifications incorporating both lagged and future inflation they report small coefficients on lagged inflation and conclude that the new keynesian model provides a good first approximation to inflation dynamics we show that these tests have low power against alternative backward looking specifications and demonstrate that their results are also consistent with a backward looking phillips curve using an alternative approach we find that the new keynesian pricing model cannot explain the importance of lagged inflation in standard inflation regressions and find that forward looking terms play a very limited role in explaining inflation dynamics

why inflation rose and fell policy makers beliefs and u s postwar stabilization policy this paper provides an explanation for the run up of u s inflation in the 1960s and 1970s and the sharp disinflation in the early 1980s which standard macroeconomic models have difficulties in addressing i present a model in which rational policymakers learn about the behavior of the economy in real time and set stabilization policy optimally conditional on their current beliefs the steady state associated with the self confirming equilibrium of the model is characterized by low inflation however prolonged episodes of high inflation ending with rapid disinflations can occur when policymakers underestimate both the natural rate of unemployment and the persistence of inflation in the phillips curve i estimate the model using likelihood methods the estimation results show that the model accounts remarkably well for the evolution of policymakers beliefs stabilization policy and the postwar behavior of inflation and unemployment in the united states

the termination of international sanctions explaining target compliance and sender capitulation abstract with the proliferation of sanctions after the end of the cold war the termination of these punitive measures has become a ubiquitous phenomenon in international politics yet research has hitherto almost exclusively focused on sanctions implementation and effectiveness whereas their termination has received little attention in this paper we draw on studies analyzing the varying duration of sanctions to examine under which conditions they end in contrast to prior research that has mostly treated the end of sanctions as a single category our analysis disaggregates sanctions termination by target compliance and sender capitulation we run a competing risks model using novel dyadic sanctions data and show that the determinants of both outcomes significantly diverge while poor economic health and high political volatility in the target country make it significantly more likely to comply political alignment between the sender and target and leadership changes in the sender country lead to a higher probability of sender capitulation

robustness of the estimates of the hybrid new keynesian phillips curve abstract gali and gertler 1999 inflation dynamics a structural econometric approach journal of monetary eonomics 44 2 195 222 developed a hybrid variant of the new keynesian phillips curve that relates inflation to real marginal cost expected future inflation and lagged inflation gmm estimates of the model suggest that forward looking behavior is dominant the coefficient on expected future inflation substantially exceeds the coefficient on lagged inflation while the latter differs significantly from zero it is quantitatively modest several authors have suggested that our results are the product of specification bias or suspect estimation methods here we show that these claims are incorrect and that our results are robust to a variety of estimation procedures including gmm estimation of the closed form and nonlinear instrumental variables also as we discuss many others have obtained very similar results to ours using a systems approach including fiml techniques hence the conclusions of gg and others regarding the importance of forward looking behavior remain robust

shocks and government beliefs the rise and fall of american inflation working paper 2004 22 september 2004 abstract the authors use a bayesian markov chain monte carlo algorithm to estimate a model that allows temporary gaps between a true expectational phillips curve and the monetary authority s approximating nonexpectational phillips curve a dynamic programming problem implies that the monetary authority s inflation target evolves as its estimated phillips curve moves the authors estimates attribute the rise and fall of post world war ii inflation in the united states to an intricate interaction between the monetary authority s beliefs and economic shocks shocks in the 1970s altered the monetary authority s estimates and made it misperceive the tradeoff between inflation and unemployment that misperception caused sharp rise in inflation in the 1970s the authors estimates indicate that policy makers updated their beliefs continuously by the 1980s policy makers beliefs about the phillips curve had changed enough to account for fed chairman paul volcker s conquest of u s inflation in the early 1980s jel classification e3 e5 key words updating beliefs policy evaluation self confirming equilibrium nash inflation ramsey outcomes i introduction today many statesmen and macroeconomists believe that inflation can largely be determined by a government monetary authority then why did the federal reserve board preside over high us inflation during the late 1960s and the 1970s and why under paul volcker did it rapidly bring inflation down during the early 1980s this paper answers these questions by estimating a model that features a particular process that makes a procession of economic shocks induce the monetary authority to alter its model of inflation unemployment dynamics the phillips curve at each date t the monetary authority updates its beliefs about the phillips curve and then recomputes a first period action recommended by a phelps problem a discounted dynamic programming problem that minimizes the expected value of a discounted quadratic loss function of inflation and unemployment 1 the monetary authority pursues the same objectives at each date using the same structural model with only its estimates of that model changing over time 2 this model of the systematic part of inflation puts the monetary authority s beliefs about the phillips curve front and center 3 we assume that the monetary authority s model of the phillips curve deviates in two subtle but important ways from what it would be in a rational expectations model e g kydland and prescott 1977 the first deviation is that while the true phillips curve is like kydland and prescott s we assume that the monetary authority omits the public s expected rate of inflation from its phillips curve by itself this omission need not prevent the outcomes of our model from coinciding with those of kydland and prescott s nor need it imply that the government s model is wrong in a way that could be detected from even an infinite sample whether the monetary authority s model is wrong in a statistically detectable way depends on how we allow the monetary authority to reestimate the parameters of its model in particular if the monetary authority were to believe that the coefficients of its phillips curve are constant over time then its estimates would converge to ones that support a self confirming equilibrium sce after convergence its estimated phillips curve would correctly describe occurrences along the sce path for inflation and unemployment such an after convergence version of our model has little hope of explaining the rise and fall of us inflation that model would have inflation fluctuating randomly around a constant sce level that coincides with kydland and prescott s time consistent suboptimal i e excessive level 4 this outcome motivates our second subtle deviation from a rational expectations equilibrium

the nairu unemployment and monetary policy this paper examines the precision of conventional estimates of the nairu and the role of the nairu and unemployment in forecasting inflation the authors find that although there is a clear empirical phillips relation the nairu is imprecisely estimated forecasts of inflation are insensitive to the nairu and there are other leading indicators of inflation that are at least as good as unemployment this suggests deemphasizing the nairu in public discourse about monetary policy and instead drawing on a richer variety of leading indicators of inflation