Séminaire

Real Keynesian Models and Sticky Prices

Paul Beaudry (The University of British Columbia)

28 février 2017, 17h00–18h30

Salle MF 323

Macroeconomics Seminar

Résumé

We define Real Keynesien models to be a class of models where changes in demand can create business cycle type fluctuations even in the absence of sticky nominal prices. The goal of the paper is to explore the properties and empirical implications of a Real Keynesien model once it is embedded in a sticky price environment. In particular, we explore the extent such a model can be differetiated from a standard New Keynesien model (where nominal prices are central to explaining how demand changes transmit to quantities). We also compare the tradeoffs faced by monetary policy in a Real Keynesian environment with sticky prices versus a more standard New Keynesian environment. We find that differentiating these two class of models is quite difficult but not impossible and we highlight properties of the data that are puzzling from a New Keynesian perspective but easily explained with the sticky price version of a Real Keynesian model. Finally we emphasize why the two class of models have important differences for the effects of stabilization policy.