Macroeconomics Seminar Series. "Optimal Monetary Policy during a Cost of Living Crisis", with Alan Olivi and Dajana Xhani
Published: 16 September 2024
26 September 2024. Professor Vincent Sterk, University College London
Professor Vincent Sterk, University College London
"Optimal Monetary Policy during a Cost of Living Crisis", with Alan Olivi and Dajana Xhani
Thursday, 26 September 2024. 15:00-16:30
Room 141A, Adam Smith Business School Building
Abstract
How should monetary policy react to sectoral shocks in a world where consumption baskets and demand elasticities vary across households? We present a multi-sector New-Keynesian model with generalized, non-homothetic preferences and inequality. The output gap is governed by a Marginal Consumer Price Index (MCPI), rather than the regular CPI. Policy trade-offs are shaped by two novel wedges in the New-Keynesian Phillips Curve (NKPC). Analytical results and quantitative simulations show that, following a negative shock to necessity sectors, the NKPC is shifted upward, increasing CPI inflation but decreasing the output gap. We find that the optimal policy response is relatively accommodative.
Bio
Vincent Sterk is a professor in Economics at University College London (UCL) and an adjunct professor at NHH Bergen. His field of interest is macroeconomics, and in particular business cycles, monetary policy, firm dynamics and household inequality. Currently, he serves as a joint managing editor at the Review of Economic Studies.
For further information, please contact business-seminar-series@glasgow.ac.uk.
We foster a positive and productive environment for seminars through our Code of conduct.
First published: 16 September 2024
<< 2024