News Shocks , Price Levels , and Monetary Policy

  title={News Shocks , Price Levels , and Monetary Policy},
  author={Christopher J. Erceg and Dale W. Henderson},
This paper presents a model in which improvement in the future TFP is, on impact, associated with increases in consumption, stock prices, and real wages, and decreases in GDP, investment, hours worked, and inflation. These predictions are consistent with empirical findings of Barsky and Sims. The model features research and development, sticky nominal wages… CONTINUE READING