Research Seminar of International Laboratory for Macroeconomic Analysis: Ilya Gulenkov «Fiscal Multipliers, Trend Inflation, and Endogenous Price Stickiness: Evidence from the U.S.»
Dear Colleagues,
International Laboratory for Macroeconomic Analysis invites everyone to join our research seminar on the 30th of November 2023 (Wednesday) at 17:00 PM (Moscow).
Speaker: Ilya Gulenkov - HSE
Theme: «Fiscal Multipliers, Trend Inflation, and Endogenous Price Stickiness: Evidence from the U.S.»
Abstract:
A post-COVID surge in inflation in the U.S. has already affected the behaviour of economic agents, which opens the possibility of entering a regime of higher structural inflation than before. While the impact of trend inflation on monetary policy is well-studied, it has been largely overlooked when it comes to fiscal policy analysis. This study analyzes the fiscal transmission under different inflation regimes. We use a New Keynesian model with habits in consumption and endogenous price stickiness to generate predictions about fiscal policy under non-zero trend inflation. The empirical analysis based on smooth transition local projections reveals considerable differences in the effect of fiscal shocks across inflation regimes. In a high inflation environment, the cumulative multiplier peaks at 0.3 and crowds in consumption, while in a low inflation regune the effect reaches 0.87 and consumption is crowded out. In a high trend inflation regime, fiscal shocks are more inflationary, which speaks in favour of state-dependent pricing. The benchmark structural model fails to accurately capture the fiscal transmission, suggesting that changes have to be made to adapt the NK framework for fiscal policy analysis under non-zero trend inflation.
Working language: English
Place: online
Link: https://us06web.zoom.us/j/83152658070?pwd=bsidPao8vcKe3JCb6fYzYpXUV6o4kQ.1
ID: 831 5265 8070
Passport: 648473
Looking forward to see you.