Salle 3001

Luca GAMBETTI (Universitat Autònoma de Barcelona) “Asymmetric Monetary Policy Tradeoffs”

Abstract: We measure the inflation-unemployment tradeoff associated with monetary eas-ing and tightening, during booms and recessions, using a novel nonlinear Proxy-SVAR approach. We find evidence of significant nonlinearities for the U.S. economy (1973:M1 – 2019:M6): stimulating economic activity during recessions is associated with minimal costs in terms of inflation, and reducing inflation during booms deliv-ers small costs in terms of unemployment. Overall, these results provide support for countercyclical monetary policies, in contrast with what predicted by a flat Phillips curve, or previous studies on nonlinear effects of monetary policy. The presence of an asymmetric monetary tradeoff can be rationalized by a simple model with down-ward nominal wage rigidity, which is also used to assess the validity of our empirical approach.

Joint work : Davide DEBORTOLI, Mario FORNI and Luca SALA

Organizer : Giovanni RICCO