the relationship between value systems, motivation - Repositories
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Transcript of p. 1/22 · 2016-05-26 · Value of a shopper or a job-seeker is H S = H U = 73.0 Value of a buyer...
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[Journal of Political Economy, 2005, vol. 113, no. 1]� 2005 by The University of Chicago. All rights reserved. 0022-3808/2005/11301-0003$10.00
Nominal Rigidities and the Dynamic Effects of a
Shock to Monetary Policy
Lawrence J. Christiano and Martin EichenbaumNorthwestern University, National Bureau of Economic Research, and Federal Reserve Bank ofChicago
Charles L. EvansFederal Reserve Bank of Chicago
We present a model embodying moderate amounts of nominal rigid-ities that accounts for the observed inertia in inflation and persistencein output. The key features of our model are those that prevent asharp rise in marginal costs after an expansionary shock to monetarypolicy. Of these features, the most important are staggered wage con-tracts that have an average duration of three quarters and variablecapital utilization.
I. Introduction
This paper seeks to understand the observed inertial behavior of infla-tion and persistence in aggregate quantities. To this end, we formulateand estimate a dynamic, general equilibrium model that incorporatesstaggered wage and price contracts. We use our model to investigatethe mix of frictions that can account for the evidence of inertia andpersistence. For this exercise to be well defined, we must characterize
The first two authors are grateful for the financial support of a National Science Foun-dation grant to the National Bureau of Economic Research. We would like to acknowledgehelpful comments from Lars Hansen and Mark Watson. We particularly want to thankLevon Barseghyan for his superb research assistance, as well as his insightful commentson various drafts of the paper. This paper does not necessarily reflect the views of theFederal Reserve Bank of Chicago or the Federal Reserve System.
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Household
I S: Shopping, that is, searching for an appropriategoods supplier
I R: Buying under an established relationship with asupplier
I U : Seeking work
I J : Working at a job
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Household
I S: Shopping, that is, searching for an appropriategoods supplier
I R: Buying under an established relationship with asupplier
I U : Seeking work
I J : Working at a job
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Household
I S: Shopping, that is, searching for an appropriategoods supplier
I R: Buying under an established relationship with asupplier
I U : Seeking work
I J : Working at a job
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Household
I S: Shopping, that is, searching for an appropriategoods supplier
I R: Buying under an established relationship with asupplier
I U : Seeking work
I J : Working at a job
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Search and matching
Success rate for shopper: θR
1+θR
Success rate for job-seeker: θJ
1+θJ
Success rate for retailer attracting customer: 11+θR
Success rate for producer recruiting worker: 11+θJ
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Search and matching
Success rate for shopper: θR
1+θR
Success rate for job-seeker: θJ
1+θJ
Success rate for retailer attracting customer: 11+θR
Success rate for producer recruiting worker: 11+θJ
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Search and matching
Success rate for shopper: θR
1+θR
Success rate for job-seeker: θJ
1+θJ
Success rate for retailer attracting customer: 11+θR
Success rate for producer recruiting worker: 11+θJ
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Search and matching
Success rate for shopper: θR
1+θR
Success rate for job-seeker: θJ
1+θJ
Success rate for retailer attracting customer: 11+θR
Success rate for producer recruiting worker: 11+θJ
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Household Bellman system
HS = β
(θR
1 + θR
HR +1
1 + θR
HS
)
HR = α(p− p) + β [sRHS + (1− sR)HR]
HU = β
(θJ
1 + θJ
HJ +1
1 + θJ
HU
)
HJ = w − zp + β [sJHU + (1− sJ)HJ ]
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Household Bellman system
HS = β
(θR
1 + θR
HR +1
1 + θR
HS
)
HR = α(p− p) + β [sRHS + (1− sR)HR]
HU = β
(θJ
1 + θJ
HJ +1
1 + θJ
HU
)
HJ = w − zp + β [sJHU + (1− sJ)HJ ]
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Household Bellman system
HS = β
(θR
1 + θR
HR +1
1 + θR
HS
)
HR = α(p− p) + β [sRHS + (1− sR)HR]
HU = β
(θJ
1 + θJ
HJ +1
1 + θJ
HU
)
HJ = w − zp + β [sJHU + (1− sJ)HJ ]
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Household Bellman system
HS = β
(θR
1 + θR
HR +1
1 + θR
HS
)
HR = α(p− p) + β [sRHS + (1− sR)HR]
HU = β
(θJ
1 + θJ
HJ +1
1 + θJ
HU
)
HJ = w − zp + β [sJHU + (1− sJ)HJ ]
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Household optimization
HS = HU .
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Retailer’s Bellman system
FO = −kRy + β
(1
1 + θR
FR +θR
1 + θR
FO
)
FR = α(p− y) + β (1− sR)FR
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Retailer’s Bellman system
FO = −kRy + β
(1
1 + θR
FR +θR
1 + θR
FO
)
FR = α(p− y) + β (1− sR)FR
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Producer’s Bellman system
FV = −kJy + β
(1
1 + θJ
FJ +θJ
1 + θJ
FV
)
FJ = yx− w + β (1− sJ)FJ
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Producer’s Bellman system
FV = −kJy + β
(1
1 + θJ
FJ +θJ
1 + θJ
FV
)
FJ = yx− w + β (1− sJ)FJ
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Free entry to retailing and
production
FO = 0
andFV = 0.
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Calibration
sR and sJ = known value for the labor market of 3 percentper month
θR = θJ = 1, implies supplier-finding and job-finding ratesof 0.5, and an unemployment rate of 5.7 percent
α, the number of units of output purchased each period bya buyer, =4.6, from American Time Use Survey
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Calibration
sR and sJ = known value for the labor market of 3 percentper month
θR = θJ = 1, implies supplier-finding and job-finding ratesof 0.5, and an unemployment rate of 5.7 percent
α, the number of units of output purchased each period bya buyer, =4.6, from American Time Use Survey
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Calibration
sR and sJ = known value for the labor market of 3 percentper month
θR = θJ = 1, implies supplier-finding and job-finding ratesof 0.5, and an unemployment rate of 5.7 percent
α, the number of units of output purchased each period bya buyer, =4.6, from American Time Use Survey
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Calibration, continued
Disamenity of work z = 0.6
β = 0.951/12
Normalize productivity at x = 1 and the intermediateproduct price at y = 1.
Households and sellers have equal shares of the transactionsurplus and where workers and producers have equal sharesof the employment surplus.
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Calibration, continued
Disamenity of work z = 0.6
β = 0.951/12
Normalize productivity at x = 1 and the intermediateproduct price at y = 1.
Households and sellers have equal shares of the transactionsurplus and where workers and producers have equal sharesof the employment surplus.
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Calibration, continued
Disamenity of work z = 0.6
β = 0.951/12
Normalize productivity at x = 1 and the intermediateproduct price at y = 1.
Households and sellers have equal shares of the transactionsurplus and where workers and producers have equal sharesof the employment surplus.
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Calibration, continued
Disamenity of work z = 0.6
β = 0.951/12
Normalize productivity at x = 1 and the intermediateproduct price at y = 1.
Households and sellers have equal shares of the transactionsurplus and where workers and producers have equal sharesof the employment surplus.
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Implications
Value of a shopper or a job-seeker is HS = HU = 73.0
Value of a buyer or a worker is HR = HJ = 73.6
Value of a customer relationship or employmentrelationship FR = 0.625.
Wage w = 0.979
Product price p = 1.005
Shadow price of the product delivered to the home isp = 1.077.
Cost of maintaining a consumer opening kR = 0.063
Cost of maintaining a vacancy kJ = 0.313.
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Implications
Value of a shopper or a job-seeker is HS = HU = 73.0
Value of a buyer or a worker is HR = HJ = 73.6
Value of a customer relationship or employmentrelationship FR = 0.625.
Wage w = 0.979
Product price p = 1.005
Shadow price of the product delivered to the home isp = 1.077.
Cost of maintaining a consumer opening kR = 0.063
Cost of maintaining a vacancy kJ = 0.313.
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Implications
Value of a shopper or a job-seeker is HS = HU = 73.0
Value of a buyer or a worker is HR = HJ = 73.6
Value of a customer relationship or employmentrelationship FR = 0.625.
Wage w = 0.979
Product price p = 1.005
Shadow price of the product delivered to the home isp = 1.077.
Cost of maintaining a consumer opening kR = 0.063
Cost of maintaining a vacancy kJ = 0.313.
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Implications
Value of a shopper or a job-seeker is HS = HU = 73.0
Value of a buyer or a worker is HR = HJ = 73.6
Value of a customer relationship or employmentrelationship FR = 0.625.
Wage w = 0.979
Product price p = 1.005
Shadow price of the product delivered to the home isp = 1.077.
Cost of maintaining a consumer opening kR = 0.063
Cost of maintaining a vacancy kJ = 0.313.
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Implications
Value of a shopper or a job-seeker is HS = HU = 73.0
Value of a buyer or a worker is HR = HJ = 73.6
Value of a customer relationship or employmentrelationship FR = 0.625.
Wage w = 0.979
Product price p = 1.005
Shadow price of the product delivered to the home isp = 1.077.
Cost of maintaining a consumer opening kR = 0.063
Cost of maintaining a vacancy kJ = 0.313.
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Implications
Value of a shopper or a job-seeker is HS = HU = 73.0
Value of a buyer or a worker is HR = HJ = 73.6
Value of a customer relationship or employmentrelationship FR = 0.625.
Wage w = 0.979
Product price p = 1.005
Shadow price of the product delivered to the home isp = 1.077.
Cost of maintaining a consumer opening kR = 0.063
Cost of maintaining a vacancy kJ = 0.313.
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Implications
Value of a shopper or a job-seeker is HS = HU = 73.0
Value of a buyer or a worker is HR = HJ = 73.6
Value of a customer relationship or employmentrelationship FR = 0.625.
Wage w = 0.979
Product price p = 1.005
Shadow price of the product delivered to the home isp = 1.077.
Cost of maintaining a consumer opening kR = 0.063
Cost of maintaining a vacancy kJ = 0.313.
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Implications
Value of a shopper or a job-seeker is HS = HU = 73.0
Value of a buyer or a worker is HR = HJ = 73.6
Value of a customer relationship or employmentrelationship FR = 0.625.
Wage w = 0.979
Product price p = 1.005
Shadow price of the product delivered to the home isp = 1.077.
Cost of maintaining a consumer opening kR = 0.063
Cost of maintaining a vacancy kJ = 0.313.
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Homogeneity
If (p, y, w) is an equilibrium, so is (λp, λy, λw) for anypositive λ
Normalize as (p/y, w/y)
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Equilibrium wage and price
0.5
0.6
0.7
0.8
0.9
1.0
1.1
0.5 1.0 1.5 2.0
Price
Wag
e
Lowest viable price
Highest viable wage
Slope = z
Equilibria given p and w
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Equilibrium wage and price,
magnified
0.91
0.92
0.93
0.94
0.95
0.96
0.97
0.98
0.99
1.00
1.01
0.97 0.99 1.01 1.03 1.05 1.07
Price
Wag
e
Low
est v
iabl
e pr
ice
Highest viable wage
Equilibria given p and w
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Static equilibrium set
z ≤ w
y≤ x− 1− β(1− sJ)
βkJ
1− β(1− sR)
αβkR ≤ p
y≤ w
yz.
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Static equilibrium set
z ≤ w
y≤ x− 1− β(1− sJ)
βkJ
1− β(1− sR)
αβkR ≤ p
y≤ w
yz.
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Real wage
z ≤ w
p≤
x− 1−β(1−sJ )β
kJ
1−β(1−sR)αβ
kR − 1
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Time allocation
(1 +
sR(1 + θR)
θR
)q
α+
(1 +
sJ(1 + θJ
θJ
)q
x= 1
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Output and price
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
0.988 0.990 0.992 0.994 0.996 0.998 1.000 1.002 1.004
Intermediate product price, y
Out
put,
q
Lowest viable, p/y
Highest viable w/y
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Allocation of time
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
0.988 0.990 0.992 0.994 0.996 0.998 1.000 1.002 1.004
Intermediate product price, y
Sha
re o
f hou
seho
ld ti
me
Working
Job-seeking
Shopping
Buying
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Dynamic model
HS,i = HU,i.
HS,i = βE
(θR,i
1 + θR,i
HR,i′ +1
1 + θR,i
HS,i′
)HR,i = α(pi − pL(i)) + βE [sRHS,i′ + (1− sR)HR,i′ ]
HU,i = βE
(θJ,i
1 + θJ,i
HJ,i′ +1
1 + θJ,i
HU,i′
)HJ,i = wL(i) − zp + βE [sJHU,i′ + (1− sJ)HJ,i′ ]
0 = −kRyi + βE
(1
1 + θR,i
FR,i′
)FR,i = α(pL(i) − yi) + β E [(1− sR)FR,i′ ]
0 = −kJyi + βE
(1
1 + θJ,i
FJ,i′
)FJ,i = yixC(i) − wL(i) + β E [(1− sJ)FJ,i′ ]
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Response to productivity
0.994
0.996
0.998
1.000
1.002
1.004
1.006
0.997 0.998 0.999 1.000 1.001 1.002 1.003Productivity
4.97
4.98
4.99
5.00
5.01
5.02
5.03
5.04
5.05
5.06
Labor-market tightness
Product-market tightness (right scale)
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Alternative outcomes
Lowest Low Medium High Highest
Productivity 0.998 0.999 1.000 1.001 1.002
Stabilize labor market
Labor market tightness 1.00 1.00 1.00 1.00 1.00
Product market tightness 2.2 3.3 5.0 6.7 7.8
Intermediate price 0.9993 0.9982 0.9972 0.9962 0.9951
Stabilize product market
Labor market tightness 0.88 0.93 1.00 1.07 1.12
Product market tightness 5.0 5.0 5.0 5.0 5.0
Intermediate price 0.9972 0.9972 0.9972 0.9972 0.9972
Productivity
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Central bank policy
yι = E(yi|C(i) = ι)
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Hypothetical economy
HR,ι −HS,ι = FR,ι,
HJ,ι −HU,ι = FJ,ι,
Let the price and wage in this hypothetical economy be pι
and wι
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Hawk and dove policies
Hawk: Solve the hypothetical model for the policy yH,i thatkeeps the price level pι constant across the fundamentalstates
Dove: solve for the policy yD,i that keeps θJ constant
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Hawk and dove policies
Hawk: Solve the hypothetical model for the policy yH,i thatkeeps the price level pι constant across the fundamentalstates
Dove: solve for the policy yD,i that keeps θJ constant
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Hawk policy
0.80
0.85
0.90
0.95
1.00
1.05
1.10
0.997 0.998 0.999 1.000 1.001 1.002 1.003Current productivity
Labo
r tig
htne
ss
2→1
1→2
3→2 4→3
2→3 3→4
5→4
4→5
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Dove policy
3
4
5
6
7
0.997 0.998 0.999 1.000 1.001 1.002 1.003Current productivity
Prod
uct t
ight
ness
2→1
1→2
3→24→3
2→33→4
5→4
4→5
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Policy frontier
yi = hyH,i + (1− h)yD,i.
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Volatility of tightness
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
0.18
0.0 0.2 0.4 0.6 0.8 1.0 1.2Hawkishness, h
Coe
ffici
ent o
f var
iatio
n
Labor-market tightness
Product-market tightness
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Volatilities of price and wage
0.0000
0.0002
0.0004
0.0006
0.0008
0.0010
0.0012
0.0014
0.00 0.20 0.40 0.60 0.80 1.00 1.20Hawkishness, h
Coe
ffici
ent o
f var
iatio
n
Price level
Wage level
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