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Author:Gali, Jordi 

Conference Paper
Monetary policy rules in practice

Proceedings , Issue Mar

Conference Paper
Understanding the effects of government spending on consumption

Proceedings

Conference Paper
Real wage rigidities and the New Keynesian model

Proceedings

Working Paper
Understanding the effects of government spending on consumption

Recent evidence on the effect of government spending shocks on consumption cannot be easily reconciled with existing optimizing business cycle models. We extend the standard New Keynesian model to allow for the presence of rule-of-thumb (non-Ricardian) consumers. We show how the interaction of the latter with sticky prices and deficit financing can account for the existing evidence on the effects of government spending.
International Finance Discussion Papers , Paper 805

Conference Paper
Optimal fiscal policy in a monetary union

We lay out an optimizing multicountry framework suitable for fiscal policy analysis in a monetary union. We show that, for any given member country, the relinquishment of monetary policy independence, coupled with nominal price rigidity, generates a motive for fiscal stabilization beyond the optimal provision of public goods. This incentive depends on the degree of symmetry between that country?s and the union average natural rate of interest. Interestingly, this is shown to be the case despite fiscal policy being set, in each individual country, in order to maximize welfare at the level of ...
Proceedings

Conference Paper
On the sources of the Great Moderation

The remarkable decline in macroeconomic volatility experienced by the U.S. economy since the mid-80s (the so-called Great Moderation) has been accompanied by large changes in the patterns of comovements among output, hours and labor productivity. Those changes are reflected in both conditional and unconditional second moments as well as in the impulse responses to identified shocks. That evidence points to structural change, as opposed to just good luck, as an explanation for the Great Moderation. We use a simple macro model to suggest some of the immediate sources which are likely to be ...
Proceedings , Issue Nov

Conference Paper
Sources of real exchange rate fluctuations: how important are nominal shocks?

Proceedings , Issue Apr

Working Paper
Real wage rigidities and the New Keynesian model

Most central banks perceive a trade-off between stabilizing inflation and stabilizing the gap between output and desired output. However, the standard new Keynesian framework implies no such trade-off. In that framework, stabilizing inflation is equivalent to stabilizing the welfare-relevant output gap. In this paper, we argue that this property of the new Keynesian framework, which we call the divine coincidence, is due to a special feature of the model: the absence of nontrivial real imperfections. ; We focus on one such real imperfection, namely, real wage rigidities. When the baseline new ...
Working Papers , Paper 05-14

Working Paper
The Optimal Inflation Target and the Natural Rate of Interest

We study how changes in the steady-state real interest rate affect the optimal inflation target in a New Keynesian DSGE model with trend inflation and a lower bound on the nominal interest rate. In this setup, a lower steady-state real interest rate increases the probability of hitting the lower bound. That effect can be counteracted by an increase in the inflation target, but the resulting higher steady-state inflation has a welfare cost in and of itself. We use an estimated DSGE model to quantify that tradeoff and determine the implied optimal inflation target, conditional on the monetary ...
Working Papers , Paper 19-18

Journal Article
Trends in hours, balanced growth, and the role of technology in the business cycle

This paper revisits a property embedded in most dynamic macroeconomic models: the stationarity of hours worked. First, the author argues that, contrary to what is often believed, there are many reasons why hours could be nonstationary in those models, while preserving the property of balanced growth. Second, the author shows that the postwar evidence for most industrialized economies is clearly at odds with the assumption of stationary hours per capita. Third, he examines the implications of that evidence for the role of technology as a source of economic fluctuations in the G7 countries.
Review , Volume 87 , Issue Jul

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