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Limited asset market participation, sticky wages and monetary policy

Abstract:

A small amount of nominal wage stickiness makes Limited Asset Market Participation (LAMP) irrelevant for the design of monetary policy. Recent research argues that LAMP could invert the slope of the IS curve in otherwise standard New Keynesian models. This, in turn, implies that optimal monetary policy rules should be passive. We show that the so called Inverted Aggregate Demand Logic (IADL) relies on nominal wage áexibility. Outside of extreme parameterizations, wage stickiness prevents the ...

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Publication status:
Published
Peer review status:
Peer reviewed

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Publisher copy:
10.1111/ecin.12424

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Institution:
University of Oxford
Division:
SSD
Department:
Economics
Role:
Author
Publisher:
Wiley Publisher's website
Journal:
Economic Inquiry Journal website
Volume:
55
Issue:
2
Pages:
878–897
Publication date:
2016-12-22
Acceptance date:
2016-10-10
DOI:
EISSN:
1465-7295
ISSN:
0095-2583
Source identifiers:
652543
Keywords:
Pubs id:
pubs:652543
UUID:
uuid:6c0b9e7b-775d-498c-abb7-0028deab665f
Local pid:
pubs:652543
Deposit date:
2016-10-14

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