Franck Portier

Money, New-Keynesian macroeconomics and the business cycle

Abstract We show in this paper that the typical modern business cycle cannot be reduced to the real business cycles archetype. A monopolistic competition model with price adjustment costs, affected by technological and monetary shocks, better mimics the economic fluctuations in two countries with very different cyclical properties, namely France and the United States. In our model, monetary shocks are necessary to reproduce the standard deviation of output, the money-output correlation, the labour productivity-worked hours relative standard deviation, the labour productivity-worked hours correlation and the mark-up-output correlation. With two independent shocks, one real, more specifically defined than the Solow residual, and one nominal, the model gives an answer to some empirical puzzles, which were left unexplained by traditional RBC models.

Time to implement and aggregate fluctuations

In this paper, we slightly modify the canonical RBC model by adding an implementation lag in the technology, to reproduce the fact that consumption is a leading indicator of output. Indeed, we assume that agents have today some information on the realization of the technology shock that will occur tomorrow. Today, inventions are known, and give information on the innovations which will be implemented tomorrow. The model is estimated and tested on US data by a simulated method of moments, using some suitable reconstructed data that are compatible with that model. The results are in favor of this implementation lag hypothesis: the model is not rejected by US post-war data.

Efficiency and stabilization: reducing Harberger triangles and Okun gaps

Abstract We provide in this paper a simple example of a dynamic stochastic imperfectly competitive economy in which introducing some distortive taxation increases both allocation efficiency and stabilization.

FINANCING UNEMPLOYMENT BENEFITS IN THE BUSINESS CYCLE: STABILIZATION, WELFARE AND EQUITY ISSUES

We study in an stochastic intertemporal general equilibrium the implications on stabilization and welfare indicators of alternative financing schemes of unemployment benefits. The question we ask is whether or not an unemployment benefits institution can insure workers against macroeconomic risk within the business cycle.

Nominal Rigidities and Monopolistic Competition: A New-Keynesian View

We show in this chapter that the business cycle can not be reduced to the real business cycles archetype. A monopolistic competition model with price adjustment costs, affected by technological and monetary shocks, better mimics the economic fluctuations in two countries with very different cyclical properties, namely France and the United States. An alternative version of the model with increasing returns to scale is also studied, and is shown to slightly modify the cyclical behavior of the benchmark model. With two independent shocks, one real, more specifically defined than the Solow residual, and one nominal, tne benchmark model gives an answer to these empirical puzzles, which were left unexplained by traditional RBC models.

Contraintes d'encaisses préalables et fluctuations économiques.

[fre] Contraintes dencaisses prealables et fluctuations economiques. . La reproduction de la dimension nominale du cycle et la prise en compte de chocs monetaires comme source de fluctuations demeurent un enjeu essentiel de lanalyse du cycle economique, face au developpement de la litterature du courant des cycles reels. Une contrainte dencaisses monetaires prealables sur la consommation, puis a la fois sur la consommation et linvestissement, est introduite dans le modele canonique de King, Plosser et Rebelo [1988]. Ce modele avec offre de travail endogene permet alors detudier le role de la taxe inflationniste, comme mecanisme de transmission des chocs monetaires dans le cycle. En outre il elargit le champ couvert par les modeles des cycles reels en introduisant une dimension nominale.. Il savere que la prise en compte de chocs monetaires modifie sensiblement les moments dordre deux generes par le modele reel de Hansen [1985] lorsque la contrainte porte egalement sur linvestissement. Cependant, la dimension nominale des fluctuations economiques en France et aux Etats-Unis savere mal reproduite. Notre modele montre ainsi quun mecanisme de transmission reposant sur la taxe inflationniste est insuffisant pour remettre en cause le message des cycles reels. [eng] Cash-in-advance constraints and the business cycle . . We propose in this article a theoretical and empirical study of the effect of monetary shocks through a cash in advance constraint on the French and American business cycle, in an intertemporal general equilibrium setting. The cash in advance model of Cooley and Hansen [1989] is extended to include current investment. This last specification gives a role to monetary disturbances in the short run dynamics of the model. The stochastic simulation of the model and its comparison with French and American data show that the model is able to mimic the real dimension of the business cycle. Nevertheless, the nominal dimension is not correctly reproduced in such a monetarized neoclassical model.