efficient search on the job and the business cycle the paper develops a model of directed search on the job in which transitions of workers between unemployment and employment and across employers are driven by heterogeneity in the quality of firm worker matches the equilibrium is such that the agents value and policy functions are independent of the endogenous distribution of workers across employment states hence the model can be solved outside of the steady state and used to measure the effect of cyclical productivity shocks on the labor market productivity shocks are found to generate large fluctuations in workers transitions unemployment and vacancies when matches are experience goods but not when matches are inspection goods

the value of hiring through employee referrals using personnel data from nine large firms in three industries call centers trucking and high tech we empirically assess the benefit to firms of hiring through employee referrals compared to nonreferred applicants referred applicants are more likely to be hired and more likely to accept offers even though referrals and nonreferrals have similar skill characteristics referred workers tend to have similar productivity compared to nonreferred workers on most measures but referred workers have lower accident rates in trucking and produce more patents in high tech referred workers are substantially less likely to quit and earn slightly higher wages than nonreferred workers in call centers and trucking the two industries for which we can calculate worker level profits referred workers yield substantially higher profits per worker than nonreferred workers these profit differences are driven by lower turnover and lower recruiting costs for referrals jel codes j24 m51 j30 j63

historical monetary policy analysis and the taylor rule this study examines the usefulness of the taylor rule framework as an organizing device for describing the policy debate and evolution of monetary policy in the united states monetary policy during the 1920s and since the 1951 treasury federal reserve accord can be broadly interpreted in terms of this framework with rather surprising consistency in broad terms during these periods policy has been generally formulated in a forward looking manner with price stability and economic stability serving as implicit or explicit guides as early as the 1920s measures of real economic activity relative to normal or potential supply appear to have influenced policy analysis and deliberations confidence in such measures as guides for activist monetary policy proved counterproductive at times resulting in excessive activism such as during the great inflation and at the brink of the great depression policy during the past two decades is broadly consistent with natural growth targeting variants of the taylor rule that exhibit less activism

the asymmetry of the new keynesian phillips curve in the euro area abstract using a two stage quantile regression framework we uncover significant asymmetries across quantiles for all coefficients in an otherwise standard new keynesian phillips curve nkpc for the euro area a pure nkpc specification accurately captures inflation dynamics at high inflation quantiles

empirical evidence on inflation expectations in the new keynesian phillips curve abstract we review the main identification strategies and empirical evidence on the role of expectations in the new keynesian phillips curve paying particular attention to the issue of weak identi

competitive search equilibrium in this paper i construct an equilibrium for markets with frictions which is competitive in the sense that all agents are price takers and maximize utility subject to a set of market parameters i show that the equilibrium allocation is socially optimal i also show how the competitive search equilibrium can be achieved if employers with vacancies can advertise publicly the wages they pay

education ranking and competition for jobs i study workers incentives to invest in general human capital education in the presence of search induced unemployment workers queue for jobs and firms prefer to hire the most productive applicants because of rent sharing as a result an unemployed worker s ranking relative to other job seekers will influence his job finding rate this creates a rat race where workers invest in education partly in order to achieve a better ranking in equilibrium identical workers may have incentives to diversify in terms of education and the investments in education may exceed the socially optimal level

search profiling with partial knowledge of deterrence consider the choice of a profiling policy where decisions to search for evidence of crime may vary with observable covariates of the persons at risk of search i pose a planning problem whose objective is to minimise the social cost of crime and search the consequences of a search rule depend on the extent to which search deters crime i study the planning problem when the planner has partial knowledge of deterrence i show how the planner can eliminate dominated search rules and how he can use the minimax or minimax regret criterion to choose an undominated rule

targeting nominal income in a dynamic model the author analyzes the choice of monetary policy rule in a perfect foresight planning model maximizing agents plan their lifetime consumption decisions in the face of two rigidities first households hold money to aid trade second today s price level is inherited from past contracting decisions so that changes in nominal aggregate demand fall on output in the short run given these rigidities the central bank can set real balances in the short run and the author compares two mu percent rules his theoretical results suggest that the choice between fixed money growth and fixed nominal income growth rules is an empirical assessment that depends on the distribution of shocks to the economy copyright 1990 by ohio state university press

it s about time implications of the period length in an equilibrium search model empirical evidence suggests that transitions between employment states are highly clustered around the first day of each workweek or month i analyze the effect of this phenomenon by presenting an equilibrium search model in which the period length is a parameter determining the degree of clustering infinitesimally short periods result in a continuous time model with bilateral meetings whereas longer time periods introduce the possibility of recall or simultaneity of job offers in this environment i show that the period length has a profound effect on equilibrium outcomes including the unemployment rate unemployment duration and the cross sectional wage distribution

the general equilibrium impacts of unemployment insurance evidence from a large online job board abstract during the great recession u s unemployment benefits were extended by up to 73 weeks theory predicts that extensions increase unemployment by discouraging job search a partial equilibrium effect using data from the large job board careerbuilder com i find that a 10 increase in benefit duration decreased state level job applications by 1 but had no robust effect on job vacancies job seekers thus faced reduced competition for jobs a general equilibrium effect calibration implies that the general equilibrium effect reduces the impact of unemployment insurance on unemployment by 39

job search and unemployment insurance new evidence from time use data article i nfo this paper provides new evidence on job search intensity of the unemployed in the u s modeling job search intensity as time allocated to job search activities the major findings are 1 the average u s unemployed worker devotes about 41 min to job search on weekdays which is substantially more than their european counterparts 2 workers who expect to be recalled by their previous employer search substantially less than the average unemployed worker 3 across the 50 states and d c job search is inversely related to the generosity of unemployment benefits with an elasticity between 1 6 and 2 2 4 job search intensity for those eligible for unemployment insurance ui increases prior to benefit exhaustion and 5 time devoted to job search is fairly constant regardless of unemployment duration for those who are ineligible for ui

the new keynesian phillips curve revisited abstract several authors have questioned the evidence claimed by gali and gertler 1999 and gali et al 2001 that a hybrid version of the new keynesian phillips curve approximates european and us inflation dynamics quite well we re examine the evidence using the vector autoregressive framework and likelihood based methods paying particular attention to the stationary and nonstationary and possibly cointegrated nature of variables involved our results show that the exact as well as the inexact form of the hybrid nkpc are clearly at odds with the european data on the other hand gali and gertler 1999 finding that the inexact hybrid nkpc is a good first approximation to the us inflation dynamics seems less at odds with the data however the assumption of the model that the stochastic term forms a sequence of innovations may be problematic as we find indication of autocorrelation in the estimated residuals the exact form of the hybrid nkpc is firmly rejected by the us data

the phillips curve under state dependent pricing abstract we derive a phillips curve equation from the dynamic stochastic general equilibrium dsge model with state dependent pricing developed by dotsey et al 1999 state dependent pricing and the general equilibrium dynamics of money and output quarterly journal of economics 114 655 690 this state dependent phillips curve encompasses the new keynesian phillips curve nkpc based on calvo type price setting as a special case we analyze the effect of the state dependent terms that is the variations in the distributions of price vintages on inflation persistence and we examine whether the hybrid nkpc that is the nkpc extended by a lagged inflation term can adequately describe inflation dynamics generated in a calibrated state dependent pricing economy

local robustness analysis theory and application this paper develops a general framework for conducting local robustness analysis by local robustness we refer to the calculation of control solutions that are optimal against the least favorable model among models close to an initial baseline we provide nash and stackelberg equilibrium characterizations of the choice of control we apply this abstract formulation to a class of discrete time control problems this analysis is conducted using frequency domain methods and is shown to involve certain fundamental limits to the efficacy of controls in such environments finally we discuss some implications of our results for monetary policy

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

directed search with multiple job applications we develop an equilibrium directed search model of the labor market where workers can simultaneously apply for multiple jobs the main result is that all equilibria exhibit wage dispersion despite the fact that workers and firms are homogeneous wage dispersion is driven by the simultaneity of application choice risk neutral workers apply for both safe and risky jobs the former yield a high probability of a job oer but for low pay and act as a fallback option the latter provide with higher potential payo but are harder to get furthermore the density of posted wages is decreasing consistent with stylized facts unlike most directed search models the equilibria are not constrained ecient

simple versus optimal rules as guides to policy this paper compares the performance of different policy rules our comparisons focus on simple feedback rules versus rules which are optimal given knowledge of the correct economic structure and the appropriate loss function for the policymaker first we compare rule performance when the correct model is not known second we compare rule performance with respect to the frequency specific behavior for variables of interest taken as a whole our results indicate how the case for a model specific optimal rule can break down when one relaxes the assumption that the true model is known as well as the assumption that the appropriate loss function is known links are made to the literature on monetary policy

toward a theory of vacancies we attempt to further characterize the search strategies of the employer in the article we discuss how characteristics of the employer or conditions that the employer faces affect the optimal search strategies and the probability of filling a vacancy in each period semiparametric and parametric methods are used to estimate hazard rates of filling vacancies the results suggest that for the given sample of vacancies the general form of the hazard function is nonmonotonic additionally the results suggest that those employers who have advance notice of the vacancy may search longer than those employers who do not

occupational and job mobility in the us we propose a new methodology to measure worker mobility across occupations and jobs in the us building on the limited longitudinal dimension of monthly cps data for the period 1979 2006 we find that about 3 5 of male workers employed in two consecutive months report different three digit occupations this rate is procyclical mildly rising in the 1980s and falling after 1995 we also revise upward current estimates of aggregate job to job mobility since 1994 from 2 7 to 3 2 of employment per month despite extreme similarity of average levels and time series behavior occupational and job mobility are only weakly correlated

robust control of forward looking models abstract this paper shows how to formulate and compute robust ramsey aka stackelberg plans for linear models with forward looking private agents the leader and the followers share a common approximating model and both have preferences for robust decision rules because both doubt the model since their preferences differ the leader s and followers decision rules are fragile to different misspecifications of the approximating model we define a stackelberg equilibrium with robust decision makers in which the leader and follower have different worst case models despite sharing a common approximating model to compute a stackelberg equilibrium we formulate a bellman equation that is associated with an artificial single agent robust control problem the artificial bellman equation contains a description of implementability constraints that include euler equations that describe the worst case analysis of the followers as an example the paper analyzes a model of a monopoly facing a competitive fringe

targeting nominal income a note this paper compares nominal income and monetary targets in a standard aggregate demand aggregate supply framework if the desirability of policies is measured by their effect on the unconditional variance of output nominal income targeting is preferable if and only if the aggregate elasticity of demand for real balances is greater than one this is precisely the opposite of the condition that in bean 1984 is sufficient to make nominal income targeting preferable this points out the importance of specification of supply and of objective function in work on nominal income targeting this abstract was borrowed from another version of this item

robust monetary policy with competing reference models abstract the existing literature on robust monetary policy rules has largely focused on the case in which the policymaker has a single reference model while the true economy lies within a specified neighborhood of the reference model in this paper we show that such rules may perform very poorly in the more general case in which non nested models represent competing perspectives about controversial issues such as expectations formation and inflation persistence using bayesian and minimax strategies we then consider whether any simple rule can provide robust performance across such divergent representations of the economy we find that a robust outcome is attainable only in cases where the objective function places substantial weight on stabilizing both output and inflation in contrast we are unable to find a robust policy rule when the sole policy objective is to stabilize inflation we analyze these results using a new diagnostic approach namely by quantifying the fault tolerance of each model economy with respect to deviations from optimal policy

frictional assignment i efficiency abstract this paper examines the two sided matching problem where the agents on each side of the market are heterogeneous and the matching process is time consuming this is cast in a labor market setting where workers of different skills match with different machine qualities i characterize the efficient allocation and then show that it can be decentralized by a market mechanism the efficient assignment is not always positively assortative despite the fact that machine qualities and skills are complementary in production to decentralize the efficient allocation the market mechanism requires the firms to post wages and commit each machine quality to a particular skill implications on wage inequality are briefly examined journal of economic literature classification numbers j31 e24 j64

optimal tariffs for trade in monopolistically competitive commodities abstract the welfare implications of international trade are examined for an economy which contains a monopolistically competitive industry and imports products directly competitive with this industry necessary and sufficient conditions for such trade to increase welfare are found and optimal import tariffs are derived and analysed

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

spectral welfare cost functions if preferences are not time separable economic agents care not only about the magnitude of fluctuations in consumption but also about the persistence and other temporal characteristics of those fluctuations this paper extends and develops the theory of spectral utility functions which measure utility frequency by frequency to illustrate the interaction between consumption volatility and time non separable preferences to highlight the economic implications of the interaction spectral welfare cost functions are developed to provide a quantitative measure of the importance to economic agents of the temporal delivery of consumption volatility

sorting versus screening search frictions and competing mechanisms in a market where sellers compete by posting trading mechanisms we allow for a general search technology and show that its features crucially affect the equilibrium mechanism price posting prevails when meetings are rival i e when a meeting by one buyer reduces another buyer s meeting probability under price posting buyers reveal their type by sorting ex ante only if the meeting technology is sufficiently non rival price posting is not an equilibrium multiple buyer types then visit the same sellers who screen ex post through auctions

new keynesian economics and the phillips curve models with sticky prices are an important part of new keynesian economics the author shows that several of the new keynesian models imply a formulation that is similar to the expectations augmented phillips curve of milton friedman and edmund phelps he then presents new estimates of the new keynesian phillips curve the author uses two proxies for price expectations survey based measures and an econometric based measure originally developed by bennett mccallum 1976 overall the results are consistent with the model but the survey based results are more precise suggesting that the surveys may be better measures of actual expectations copyright 1995 by ohio state university press

customer markets and the welfare effects of monetary policy a customer market model in which firms and customers form long term relations is developed and integrated into the canonical new keynesian framework this leads to two important differences compared to the standard model first the purely forward looking phillips curve is replaced by a hybrid variant where current inflation also depends on past inflation second the welfare cost of inflation is much lower which leads to an optimal monetary policy where relatively more weight is put on output gap stabilization than previously found in the literature

efficiency of simultaneous search this paper presents an equilibrium labor search model in which workers can simultaneously apply to multiple firms to increase their search intensity they observe firms wage postings before choosing where to apply owing to coordination frictions a firm may not receive any applications otherwise it is able to hire unless all its applicants have better offers it is shown that the equilibrium converges to the efficient walrasian outcome as application costs vanish even for nonnegligible application costs the entry of firms the search intensity and the number of filled vacancies are constrained efficient wage dispersion is essential for constrained efficiency

incentives in competitive search equilibrium this paper proposes a labor market model with job search frictions where workers have private information on match quality and eort firms use wage contracts to motivate workers in addition wages are also used to attract employees we de ne and characterize competitive search equilibrium in this context and show that it satis es a simple modi ed hosios rule the model is used to address the shimer puzzle related to the low volatility of the unemployment rate relative to the volatility of output observed in the data we nd that private information may increase the responsiveness of the unemployment rate to changes in productivity and in particular to changes in

holdups and efficiency with search frictions a natural holdup problem arises in a market with search frictions firms have to make a range of investments before finding their employees and larger investments translate into higher wages in particular when wages are determined by ex post bargaining the equilibrium is always inefficient recognizing that capital intensive production relations have to pay higher wages firms reduce their investments this can only be prevented by removing all the bargaining power from the workers but this in turn depresses wages below their social product and creates excessive entry of firms in contrast to this benchmark we show that efficiency is achieved when firms post wages and workers can direct their search toward more attractive offers this efficiency result generalizes to an environment with imperfect information where workers only observe a few of the equilibrium wage offers we show that the underlying reason for efficiency is not wage posting per se but the ability of workers to direct their search toward more capital intensive jobs

the assignment of workers to jobs in an economy with coordination frictions this paper studies the assignment of heterogeneous workers to heterogeneous jobs owing to the anonymity of a large labor market workers use mixed strategies when applying for jobs this randomness generates coordination frictions two workers may apply for a particular job whereas an identical job gets no applications the model generates assortative matching with a positive but imperfect correlation between matched workers and firms types it predicts that a worker s wage is increasing in her job s productivity and a firm s profit is increasing in its employees productivity the model also yields a version of the welfare theorems

applications and interviews firms recruiting decisions in a frictional labour market i develop a directed search model to study the recruitment decisions of firms competing for workers who ex post differ in two dimensions 1 their match productivity and 2 their probability of accepting a job offer endogenously determined by their choice of application portfolio to attract these workers firms post a recruiting intensity and a hiring standard in addition to terms of trade a higher recruiting intensity is costly but allows the firm to select more applicants for an interview which reveals their productivity the hiring standard solves the tradeoff between immediate hiring and waiting for a potentially better match in the future i characterize equilibrium and find that various outcomes including uniqueness of equilibrium and the cyclicality of recruiting intensity crucially depend on firms recruiting cost and workers search cost calibration of the model to the u s labour market indicates a continuum of equilibria given selection of a particular equilibrium hiring standards are countercyclical while recruiting intensity is procyclical the calibrated model creates more amplification than a standard model without intensive margins and gives rise to procyclical match efficiency when viewed through the lens of a cobb douglas matching function

pricing and matching with frictions suppose that n buyers each want one unit and m sellers each have one or more units of a good sellers post prices and then buyers choose sellers in symmetric equilibrium similar sellers all post one price and buyers randomize hence more or fewer buyers may arrive than a seller can accommodate we call this frictions we solve for prices and the endogenous matching function for finite n and m and consider the limit as n and m grow the matching function displays decreasing returns but converges to constant returns we argue that the standard matching function in the literature is misspecified and discuss implications for the beveridge curve

search costs and efficiency do unemployed workers search enough many labor market policies affect the marginal benefits and costs of job search the impact and desirability of such policies depend on the distribution of search costs in this paper we provide an equilibrium framework for identifying the distribution of search costs and we apply it to the dutch labor market in our model the wage distribution job search intensities and firm entry are simultaneously determined in market equilibrium given the distribution of search intensities which we directly observe we calibrate the search cost distribution and the flow value of non market time these values are then used to derive the socially optimal firm entry rates and distribution of job search intensities from a social point of view some unemployed workers search too little due to a hold up problem while other unemployed workers search too much due to coordination frictions and rent seeking behavior our results indicate that jointly increasing unemployment benefits and the sanctions for unemployed workers who do not search at all can be welfare improving

has euro area inflation persistence changed over time this paper analyzes the stability over time of the econometric process for euro area inflation since 1970 focusing in particular on the behavior of the so called persistence parameter the sum of the coefficients on the lagged dependent variables perhaps surprisingly in light of the lucas critique our principal finding is that there appears to be relatively little instability in the parameters of the euro area inflation process full sample estimates of the persistence parameter are generally close to 1 and we fail to reject the hypothesis that this parameter has been stable over time we discuss how these results provide some indirect evidence against rational expectations models with strong forward looking elements such as the new keynesian phillips curve

the establishment level behavior of vacancies and hiring this paper is the first to study vacancies hires and vacancy yields at the establishment level in the job openings and labor turnover survey a large sample of u s employers to interpret the data we develop a simple model that identifies the flow of new vacancies and the job filling rate for vacant positions the job filling rate moves counter to aggregate employment but rises steeply with employer growth rates in the cross section it falls with employer size rises with worker turnover rates and varies by a factor of four across major industry groups we also develop evidence that the employer level hiring technology exhibits constant returns and that at the employer level and that employers rely heavily on other instruments in addition to vacancies as they vary hires we also develop evidence that effective recruiting intensity per vacancy varies over time accounting for about 41 of movements in aggregate hires in the 2007 to 2009 period our evidence and analysis provide useful inputs for assessing developing and calibrating theoretical models of search matching and hiring in the labor market

what is wrong with taylor rules using judgment in monetary policy through targeting rules it is argued that inflation targeting is best understood as a commitment to a targeting rule rather than an instrument rule e ither ageneral targeting rule explicit objectives for monetary policy or a specific targeting rule a criterion for the forecasts of the target variables to be fulfilled essentially the equality of the marginal rates of transformation and substitution between the target variables targeting rules allow the use of judgment and extramodel information are more robust and easier to verify than optimal instrument rules and they can nevertheless bring the economy close to the socially optimal equilibrium

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

posterior predictive evidence on us inflation using extended new keynesian phillips curve models with non filtered data changing time series properties of us inflation and economic activity measured as marginal costs are modeled within a set of extended new keynesian phillips curve nkpc models it is shown that mechanical removal or modeling of simple low frequency movements in the data may yield poor predictive results which depend on the model specification used basic nkpc models are extended to include structural time series models that describe typical time varying patterns in levels and volatilities forward and backward looking expectation components for inflation are incorporated and their relative importance is evaluated survey data on expected inflation are introduced to strengthen the information in the likelihood use is made of simulation based bayesian techniques for the empirical analysis no credible evidence is found on endogeneity and long run stability between inflation and marginal costs backward looking inflation appears stronger than forward looking inflation levels and volatilities of inflation are estimated more precisely using rich nkpc models the extended nkpc structures compare favorably with existing basic bayesian vector autoregressive and stochastic volatility models in terms of fit and prediction tails of the complete predictive distributions indicate an increase in the probability of deflation in recent years

monetary policy rules targets and shocks the proper conduct of monetary policy is now once again wide open to discussion an immediate practical controversy concerns the role of central banks in recovery from the world depression underlying that debate are some unresolved fundamental issues regarding the responsibilities goals targets and operating procedures of central banks monetarism won the hearts and minds of many economists and most central bankers in the 1970s now it seems to be losing adherents and influence partly because it is blamed for the severe depression partly because regulatory institutional and technological changes have altered the meanings and velocities of monetary aggregates last summer chairman volcker and his federal reserve colleagues suspended their monetarist targets to almost universal relief the severity of the recession the international debt crisis and the pace of change in financial structure were all good reasons it is doubtful though possible that money stock targets will regain their previous status if not what philosophy of monetary control what framework for the conduct of policy will replace them a host of monetary architects are ready to fill the vacuum some would restore the gold standard or make paper money convertible into other commodities some would replace intermediate monetary aggregates with other targets the monetary base nominal gnp or final sales total domestic credit price indexes or their rates of change exchange rates some advocate irrevocable commitment to announced

multiple equilibria in the theory of international trade with monopolistically competitive commodities abstract this paper develops a model of trade in monopolistically competitive commodities of the type analysed by krugman and by dixit and norman it is established that small perturbations in the parameters of the model radically change the number and type of equilibria of the model for certain parameter values the model has multiple equilibria some though possibly not all of which support intra industry trade the stability of each equilibrium is examined and it is established that if there are multiple equilibria there are multiple stable equilibria

the lot of the unemployed a time use perspective this paper provides new evidence on time use and subjective well being of employed and unemployed individuals in 14 countries we devote particular attention to characterizing and modeling job search intensity measured by the amount of time devoted to searching for a new job job search intensity varies considerably across countries and is higher in countries that have higher wage dispersion we also examine the relationship between unemployment benefits and job search

optimal monetary policy in a new keynesian model with heterogeneous expectations abstract in a world where expectations are heterogeneous what is the design of the optimal policy are canonical policies robust when heterogeneous expectations are considered or would they be associated with large welfare losses we aim to answer these questions in a stylized simple new keynesian model where agents beliefs are not homogeneous assuming that a fraction of agents can form their expectations by some adaptive or extrapolative schemes we focus on an optimal monetary policy by second order approximation of the policy objective from the consumers utility function we find that the introduction of bounded rationality in the new keynesian framework matters the presence of heterogeneous agents adds a new dimension to the central bank s optimization problem consumption inequality optimal policies must be designed to stabilize the cross variability of heterogeneous expectations in fact as long as different individual consumption plans depend on different expectation paths a central bank aiming to reduce consumption inequality should minimize the cross sectional variability of expectations moreover the traditional trade off between the price dispersion and aggregate consumption variability is also quantitatively affected by heterogeneity

intra industry trade in agrofood sectors the case of the eec meat market examination of intra industry trade iit and of its determinants has so far been confined to industrial commodity markets taking the case of red meat the possibility of trade overlap in a typical agroffod commodity is observed further based on previous theoretical analyses and empirical indications it tests formally a general and a restricted set of country and industry or demand and supply hypotheses which being particular to the eec meat market may account for cross country variations in iit in 1988 results suggest that taste overlap as approached by countries cultural and economic convergence as well as the imperfectly competitive structure of the market as supported by product differentiation significantly explain iit despite some methodological shortcomings there seems to be ample scope for the application of similar models in other agrofood sectors in what remains a relatively under researched area