Working Paper: CEPR ID: DP8407
Authors: Alejandro Justiniano; Giorgio E. Primiceri; Andrea Tambalotti
Abstract: Not in an estimated DSGE model of the US economy, once we account for the fact that most of the high-frequency volatility in wages appears to be due to noise, rather than to variation in workers' preferences or market power.
Keywords: optimal policy; output gap; potential output
JEL Codes: E30; E52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| high-frequency volatility in wages (J39) | assessment of output fluctuations (E32) |
| measurement noise in wages (J39) | tradeoff between inflation and output stabilization (E63) |
| policy interventions (D78) | enhance welfare (I30) |
| optimal allocation of output (E23) | potential output (E23) |
| stabilization policy (E63) | negligible tradeoffs among objectives (L21) |
| previous models overestimate wage markup shocks (C54) | erroneous conclusions about tradeoff between output and inflation stabilization (E31) |