Centre For Macroeconomics, London, UK. The reason is simple: If monetary policy is set with the goal of minimizing welfare losses (measured as the sum of deviations of inflation from its target and output from its potential), subject to a Phillips curve, a central bank will seek to increase inflation when output is below potential. Local political leaders do so because they derive personal benefits, either political or monetary, from providing special deals. Optimal Inflation and the Identification of the Phillips Curve," NBER Working Papers 25892, National Bureau of Economic Research, Inc. References listed on IDEAS. Since the late 1990's, U.S. industries have become more concentrated and more profitable, while non residential business investment has been weak relative to fundamentals. citation courtesy of . Michael McLeay and Silvana Tenreyro; Michael McLeay. ISSN 0889-3365 Sterk, Vincent and Tenreyro, Silvana (2018) The transmission of monetary policy through redistributions and durable purchases. NBER Macroeconomics Annual 2020, 34 (1). They show why this result need not imply that the Phillips curve does not hold -- on the contrary, their conceptual framework is built under the assumption that the Phillips curve always holds. HOME PAGE. Using a variety of empirical methods, the researchers find little evidence against the irrelevance hypothesis, with their estimates suggesting that the responses of output, inflation and the long-term interest rate were hardly affected by the binding ZLB constraint, possibly as a result of the adoption and fine-tuning of unconventional monetary policies. 34th Annual Conference on Macroeconomics 2019 More from NBER In addition to working papers , the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter , the NBER Digest , the Bulletin on Retirement and Disability , and the Bulletin on Health — as well as online conference reports , video lectures , and interviews . 34th Annual Conference on Macroeconomics 2019. From 1960 to 1983, the standard deviation of annual growth rates in real GDP in the United States was 2.7%. … 61: 2020: El dinero en la economía moderna: una introducción. In addition to the conference paper, the research was distributed as NBER Working Paper w25839, which may be a more recent version. ISSN 0889-3365 Abel, Will, Tenreyro, Silvana and Thwaites, Gregory (2018) Monopsony in the UK. 02079556018; E-mail: Main Academic Positions Professor, London School of Economics 2012- Associate Professor (Reader), London School of Economics 2008-2012 Assistant Professor (Lecturer), … "Commodity Booms and Busts in Emerging Economies," Journal of International Economics , . 267–279. 33nd Annual Conference on Macroeconomics 32nd Annual Conference on Macroeconomics 31st Annual Conference on Macroeconomics 30th Annual Conference on Macroeconomics. 34(1), ... Michael McLeay & Silvana Tenreyro, 2019. " 199 - 255. Optimal Inflation and the Identification of the Phillips Curve. They focus on two dimensions of performance that were likely to have experienced the impact of a binding ZLB: (i) the volatility of macro variables and (ii) the economy's response to shocks. London, WC2A 3PH. 12. In addition to the conference paper, the research was distributed as NBER Working Paper w25820, which may be a more recent version. Juan Carlos Berganza, Fructuoso Borrallo, Pedro del Río, Determinants and Implications of Low Global Inflation Rates, International Macroeconomics in the Wake of the Global Financial Crisis, 10.1007/978-3-319-79075-6_10, (183-216), (2018). In addition to the conference paper, the research was distributed as NBER Working Paper w25931, which may be a more recent version. NATIONAL BUREAU OF ECONOMIC RESEARCH. This PDF is a selection from a published volume from the National Bureau of Economic Research Volume Title: NBER Macroeconomics Annual 2002, Volume 17 Volume Author/Editor: Mark Gertler and Kenneth Rogoff, editors Volume Publisher: MIT Press Volume ISBN: 0-262-07246-7 Volume URL: Conference Date: April 5-6, 2002 Publication Date: January 2003 Title: Optimal Currency Areas Author: … 34th Annual Conference on Macroeconomics 2019. ISSN 0889-3365 Monograph. Search for more articles by this author Silvana Tenreyro. Their shorter life expectancy reduced their retirement savings but the increase in out-of-pocket medical expenses increased them by more. Michael McLeay † Silvana Tenreyro ‡ June 2019 Abstract Several academics and practitioners have pointed out that inflation follows a seemingly exogenous statistical process, unrelated to the output gap, leading some to argue that the Phillips curve has weakened or disappeared. Older Notes and Working Papers. McLeay, M and S Tenreyro (2019), “Optimal Inflation and the Identification of the Phillips Curve”, NBER Macroeconomics Annual 2019, Vol. April 11-12, 2019 Share. McLeay, Michael and Tenreyro, Silvana (2020) Optimal inflation and the identification of the Phillips curve. with Michael McLeay in NBER Macroeconomics Annual 2019, volume 34, Martin S. Eichenbaum, Erik Hurst, and Jonathan A ... Commodity Booms and Busts in Emerging Economies with Thomas Drechsel: w23716. HOME PAGE. All Rights Reserved. This targeting rule will impart a negative correlation between inflation and the output gap, blurring the identification of the (positively sloped) Phillips curve. The reason is simple: if monetary policy is set with the goal of minimizing welfare losses (measured as the sum of deviations of inflation from its target and output from its potential), subject to a Phillips curve, a central bank will seek to increase inflation when output is below potential. The thirty-fourth volume of the NBER Macroeconomics Annual features theoretical and empirical studies of issues in contemporary macroeconomics and a keynote address by James Stock, a member of President Obama's Council of Economic Advisers from 2013 to … After documenting these changes, Borella, De Nardi, and Yang use a life-cycle model of couples and singles to evaluate their effects. Sbordone, A. Chinese local governments wield their enormous political power and administrative capacity to provide "special deals" for favored private firms. NBER Macroeconomics Annual, 34 (1). They use their model along with case studies for clear superstars (GAFAM) to assess the validity of common proxies for each hypothesis, including measures of concentration, profitability, mark-ups, investment and productivity divergence between laggard and frontier firms. Economics Letters 112 (2), 220-222, 2011. The extent to which individual responses to household surveys are protected from discovery by outside parties depends... © 2020 National Bureau of Economic Research. Optimal Inflation and the Identification of the Phillips Curve, NBER Macroeconomics Annual 2019, volume 34, The 2020 Martin Feldstein Lecture: Journey Across a Century of Women, Summer Institute 2020 Methods Lectures: Differential Privacy for Economists, The Bulletin on Retirement and Disability, Productivity, Innovation, and Entrepreneurship, Conference on Econometrics and Mathematical Economics, Conference on Research in Income and Wealth, Improving Health Outcomes for an Aging Population, Measuring the Clinical and Economic Outcomes Associated with Delivery Systems, Retirement and Disability Research Center, The Roybal Center for Behavior Change in Health, Training Program in Aging and Health Economics, Transportation Economics in the 21st Century, Comment on "Optimal Inflation and the Identification of the Phillips Curve". NBER Macroeconomics Annual, 34 (1). U.S. Industries over the past 30 years. NATIONAL BUREAU OF ECONOMIC RESEARCH. Bank of England. Bai, Hsieh, and Song argue that China's extraordinary economic growth comes from these special deals. as Christina D. Romer & David H. Romer, 2004. We show why this result need not imply that the Phillips curve does not hold — on the contrary, our conceptual framework is built under the assumption that the Phillips curve always holds. M McLeay, S Tenreyro. We use a standard conceptual framework (Clarida et al.1999; although similar results would obtain in the classic setting of Barro and Gordon 1983) to show why: 1. the empirical disconnect between inflation and slack is exactly what one should expect when monetary policy is set optimally; and 2. the result is perfectly consistent with an underlying stable and positively sloped Phillips curve. Special Deals with Chinese Characteristics Chong-En Bai, Tsinghua University, Chang-Tai Hsieh, University of Chicago and NBER, Zheng Michael Song, Chinese University of Hong Kong Download Slides Download Paper. NBER Working Papers and Publications. The zero lower bound (ZLB) irrelevance hypothesis implies that the economy's performance is not affected by a binding ZLB constraint. Welfare losses, measured a one-time asset compensation are 12.5%, 8%, and 7.2% of the present discounted value of earnings for single men, couples, and single women, respectively. M Koren, S Tenreyro. Philippon and Gutiérrez develop a simple model to differentiate four prominent explanations: decreasing domestic competition (DDC), increases in the efficient scale of operation (EFS), the rise of intangible assets (INTAN), and globalization (GLOBAL). 1 See McLeay, M. and Tenreyro, S. (2019), "Optimal Inflation and the Identification of the Phillips Curve", NBER Macroeconomics Annual 2019, volume 34 and Tenreyro, S. (2018), “Models in macroeconomics”, speech at the University of Surrey, Guildford. manufacturing output growth slowed sharply and PPP-weighted world growth is set to fall from from 3½% in 2018 to 2¾% in 2019. In doing so, they also clarify the confusion about the evolution of labor share in the U.S. and in Europe. McLeay and Tenreyro explain why this seemingly exogenous process arises, or, in other words, why it is difficult to empirically identify a Phillips curve, a key building block of the policy framework used by central banks. Michael McLeay and Silvana Tenreyro () . Powell, J H (2019), “Challenges for Monetary Policy”, Speech delivered at the "Challenges for Monetary Policy" symposium, Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming. Description. Optimal Inflation and the Identification of the Phillips Curve," NBER Chapters, in: NBER Macroeconomics Annual 2019, volume 34, pages 199-255, National Bureau of Economic Research, Inc. Michael McLeay & Silvana Tenreyro, 2018. CFM Discussion Paper Series (CFM-DP2018-27). 36: 2015: Rethinking financial stability . Comment on ‘Accounting for Factorless Income,’ by Loukas Karabarbounis and Brent Neiman NBER Macroeconomics Annual 2018, 33, pp. The extent to which individual responses to household surveys are protected from discovery by outside parties depends... © 2020 National Bureau of Economic Research. In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Retirement and Disability, and the Bulletin on Health — as well as online conference reports, video lectures, and interviews. White, non-college-educated Americans born in the 1960s face shorter life expectancies, higher medical expenses, and lower wages per unit of human capital compared with those born in the 1940s, and men's wages declined more than women's. We discuss different strategies to circumvent the identification problem and present evidence of a robust Phillips curve in US data. Specifically, in our paper the Philli… McLeay and Tenreyro explain why this seemingly exogenous process arises, or, in other words, why it is difficult to empirically identify a Phillips curve, a key building block of the policy framework used by central banks. The drop in wages depressed the labor supply of men and increased that of women, especially in married couples. 708: 2011: Volatility and development. Explaining the Rising Concentration of U.S. Industries: Superstars, Intangibles, Globalization or Market Power? Bank of England, London School of Economics, Center for Macroeconomics, and CEPR. You may be able to download this chapter for free via the Document Object Identifier. Blanchard O. e Summers LH (a cura di), Evolution or Revolution, 143-194, … McLeay, Michael and Tenreyro, Silvana (2018) Optimal inflation and the identification of the Phillips Curve. Their empirical work shows that high-quality goods are more intensive in skilled labor than low-quality goods and that household spending on high-quality goods rises with income. CFM Discussion Paper Series (CFM-DP2018-15). 34. On the Empirical (Ir)Relevance of the Zero Lower Bound Constraint, The Lost Ones: The Opportunities and Outcomes of Non-College Educated Americans Born in the 1960s, Massachusetts Institute of Technology and NBER, University of California, Los Angeles and NBER, Special Deals with Chinese Characteristics, University of California, Berkeley and NBER, Optimal Inflation and the Identification of the Phillips Curve, Southwestern University of Finance and Economics, University of California, San Diego and NBER, The 2020 Martin Feldstein Lecture: Journey Across a Century of Women, Summer Institute 2020 Methods Lectures: Differential Privacy for Economists, The Bulletin on Retirement and Disability, Productivity, Innovation, and Entrepreneurship, Conference on Econometrics and Mathematical Economics, Conference on Research in Income and Wealth, Improving Health Outcomes for an Aging Population, Measuring the Clinical and Economic Outcomes Associated with Delivery Systems, Retirement and Disability Research Center, The Roybal Center for Behavior Change in Health, Training Program in Aging and Health Economics, Transportation Economics in the 21st Century, From Good to Bad Concentration? The researchers can reconcile their empirical findings with the predictions of a simple New Keynesian model under the assumption of a shadow interest rate rule. Welcome to Silvana Tenreyro's Web page Optimal Inflation and the Phillips Curve Joint with Michael McLeay. M McLeay, A Radia, R Thomas. 199 - 255. E-Mail: Institutional Affiliation: Bank of England. The researchers highlight that some widely used measures of mark-ups and productivity divergence are prone to measurement error, and therefore provide misleading evidence on aggregate trends. 758: 2002: Further simulation evidence on the performance of the Poisson pseudo-maximum likelihood estimator. … National Bureau of Economic Research Macroeconomics Annual The thirty-fourth volume of the NBER Macroeconomics Annual features theoretical and empirical studies of issues in contemporary macroeconomics and a keynote address by James Stock, a member of President Obama’s Council of Economic Advisers from 2013 to 2014. loading... Silvana Tenreyro ... with Michael McLeay in NBER Macroeconomics Annual 2019, volume 34, Martin S. Eichenbaum, Erik Hurst, and Jonathan A. Parker, editors: May 2019: Optimal Inflation and the Identification of the Phillips Curve with Michael McLeay: w25892: August 2017: Commodity Booms and Busts in Emerging Economies with … All Rights Reserved. Silvana Tenreyro Curriculum Vitae, September 2018 Address: London School of Economics, Department of Economics, 32 Lincoln’s Inn Fields 2.19. Several academics and practitioners have pointed out that inflation follows a seemingly exogenous statistical process, unrelated to the output gap, leading some to argue that the Phillips curve has weakened or disappeared. View content coverage periods and institutional full-run subscription rates for the recent ZLB episode experienced by the U.S. in. Some to argue that the Phillips curve is a supply curve leaders do so because they derive personal benefits either., 40 Edwin H. 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