Recent empirical evidence by Fair (2002, 2005) and Giordani (2003) shows that a positive inflation shock with the nominal interest rate held constant has contractionary effects. These results cannot be reconciled with the standard "New Synthe- sis" literature. This paper reconsiders the effects of inflation shocks in a simple New Keynesian framework extended to include wealth effects. It is demonstrated that, following an inflation shock, the decline of output coupled with passive interest rate rules is not puzzling

Piergallini, A., & Annicchiarico, B. (2006). Inflation shocks and interest rate rules.

Inflation shocks and interest rate rules

PIERGALLINI, ALESSANDRO;ANNICCHIARICO, BARBARA
2006-07

Abstract

Recent empirical evidence by Fair (2002, 2005) and Giordani (2003) shows that a positive inflation shock with the nominal interest rate held constant has contractionary effects. These results cannot be reconciled with the standard "New Synthe- sis" literature. This paper reconsiders the effects of inflation shocks in a simple New Keynesian framework extended to include wealth effects. It is demonstrated that, following an inflation shock, the decline of output coupled with passive interest rate rules is not puzzling
Settore SECS-P/02 - Politica Economica
interest rate rules
nominal rigidities
overlapping generations
inflation shocks
Piergallini, A., & Annicchiarico, B. (2006). Inflation shocks and interest rate rules.
Piergallini, A; Annicchiarico, B
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/2108/353
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