The asymmetric effects of demand shocks: international evidence on determinants and implications
ABSTRACT The analysis focuses on the asymmetric effects of demand shocks. The evidence across a sample of 19 industrial countries differentiates the effects of expansionary and contractionary aggregate demand shocks on real output growth and nominal wage and price inflation. The difference appears consistent with a kinked supply curve that is dependent on the asymmetric flexibility of wages and/or prices across countries. Furthermore, the evidence does not support the endogeneity of asymmetric nominal flexibility with respect to demand variability or trend price inflation across countries. On average, across countries, demand variability increases nominal wage and price inflation relative to deflation, while exacerbating output contraction relative to expansion. The apparent trade-off between changes in real and nominal trends provides further support to the supply side explanation of asymmetry.
- SourceAvailable from: Assar LindbeckAmerican Economic Review 02/1986; 76(2):235-39. · 2.69 Impact Factor
Article: Beyond the Natural Rate Hypothesis.[Show abstract] [Hide abstract]
ABSTRACT: This paper calculates indices of central bank autonomy (CBA) for 163 central banks as of end-2003, and comparable indices for a subgroup of 68 central banks as of the end of the 1980s. The results confirm strong improvements in both economic and political CBA over the past couple of decades, although more progress is needed to boost political autonomy of the central banks in emerging market and developing countries. Our analysis confirms that greater CBA has on average helped to maintain low inflation levels. The paper identifies four broad principles of CBA that have been shared by the majority of countries. Significant differences exist in the area of banking supervision where many central banks have retained a key role. Finally, we discuss the sequencing of reforms to separate the conduct of monetary and fiscal policies. IMF Staff Papers (2009) 56, 263–296. doi:10.1057/imfsp.2008.25; published online 23 September 2008American Economic Review 01/1988; 78(2):182-87. · 2.69 Impact Factor
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ABSTRACT: This paper uses the historical record to isolate episodes in which there were large monetary disturbances not caused by output fluctuations. It then tests whether these monetary changes have important real effects. The central part of the paper is a study of postwar U.S. monetary history. We identify six episodes in which the Federal Reserve in effect decided to attempt to create a recession to reduce inflation. We find that a shift to anti-inflationary policy led, on average, to a rise in the unemployment rate of two percentage points, and that this effect is highly statistically significant and robust to a variety of changes in specification. We reach three other major conclusions. First, the real effects of these monetary disturbances are highly persistent. Second, the six shocks that we identify account for a considerable fraction of postwar economic fluctuations. And third, evidence from the interwar era also suggests that monetary disturbances have large real effects.NBER Macroeconomics Annual 03/1990;