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Essays on monetary business cycles with nominal rigidities

Lee, Junhee
http://rave.ohiolink.edu/etdc/view?acc_num=osu1115303435

Abstract Details

2005, Doctor of Philosophy, Ohio State University, Economics.
My dissertation assesses the role of money and nominal rigidities in economic fluctuations and tries to improve on the performance of existing models with nominal rigidities. The dissertation consists of two essays. The essay titled "Sticky Prices and Co-movement in the Business Cycle," examines the co-movement of economic variables across different sectors of the economy during business cycles. Specifically, I address the previously unresolved problem in standard real business cycle (RBC) models that labor used for consumption good production moves negatively with aggregate labor in sharp contrast with the data (Benhabib et al. (1991)). Traditionally, however, not only productivity shocks and real factors emphasized in standard RBC models but also monetary shocks and nominal factors are believed to be important in explaining business cycles (e.g. Friedman and Schwartz (1968)). But until now, there has been virtually no attempt to explain the sectoral co-movement in this perspective. So in this essay, I construct a sticky prices model with consumption and investment sector to examine the sectoral co-movement in models with nominal rigidities, which are widely accepted in recent monetary business cycle research. It turns out that monetary shocks can generate the observed sectoral co-movement in models with nominal rigidities. Productivity shocks also induce mild positive comovement due to the stickiness of prices, though the result may not be robust in certain specifications. In my second essay, "Labor Market Matching, Nominal Wage Stickiness and the Propagation of Monetary Shocks," I investigate whether we can obtain realistic propagation of monetary shocks in business cycle models with labor market matching and nominal rigidities. Business cycle models with nominal rigidities do not readily generate the persistent and hump shaped aggregate output dynamics in response to monetary shocks, and improvement on this score has been a key agenda among business cycle researchers. Some researchers have combined stickiness of goods prices and labor market matching but with limited success. I show that greater persistence and hump shaped dynamics of aggregate output as well as plausible labor market dynamics are obtained when nominal wage stickiness rather than nominal price stickiness is assumed in models with labor market matching.
Paul Evans (Advisor)
nominal rigidities; sticky price; sticky wage; labor market matching; monetary propagation

Recommended Citations

Citations

  • Lee, J. (2005). Essays on monetary business cycles with nominal rigidities [Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu1115303435

    APA Style (7th edition)

  • Lee, Junhee. Essays on monetary business cycles with nominal rigidities. 2005. Ohio State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=osu1115303435.

    MLA Style (8th edition)

  • Lee, Junhee. "Essays on monetary business cycles with nominal rigidities." Doctoral dissertation, Ohio State University, 2005. http://rave.ohiolink.edu/etdc/view?acc_num=osu1115303435

    Chicago Manual of Style (17th edition)

osu1115303435
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© 2005, all rights reserved.
This open access ETD is published by The Ohio State University and OhioLINK.