Inflation in the Great Recession and New Keynesian Models / Marco Del Negro, Marc P. Giannoni, Frank Schorfheide.

Format:

Book

Author/Creator:

Del Negro, Marco.

Contributor:

National Bureau of Economic Research.

Giannoni, Marc P.

Schorfheide, Frank.

Series:

Working Paper Series (National Bureau of Economic Research) no. w20055.

NBER working paper series no. w20055

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2014.

Summary:

It has been argued that existing DSGE models cannot properly account for the evolution of key macroeconomic variables during and following the recent great recession. We challenge this argument by showing that a standard DSGE model with financial frictions available prior to the recent crisis successfully predicts a sharp contraction in economic activity along with a modest and protracted decline in inflation, following the rise in financial stress in 2008Q4. The model does so even though inflation remains very dependent on the evolution of economic activity and of monetary policy.

Notes:

Print version record

April 2014.