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Christian-Albrechts-Universität zu Kiel

Institut für Volkswirtschaftslehre - Department of Economics
Economics Working Papers

Economics Working Papers: Abstract 2011-11


Nummer

2011-11

Autoren

Tore Selland Kleppe, Roman Liesenfeld

 

Titel

 

Efficient high-dimensional importance sampling in mixture frameworks
Abstract raise their income, and the latter seek to reduce it. The greater the inflation rate, the greater the degree of wage dispersion under Calvo wage contracts, and thus the greater the degree of envy and guilt experienced by the workers. Since the envy effect is stronger than the guilt effect, according to the available empirical evidence, a rise in the inflation rate leads workers to supply more labor over the contract period, generating a significant positive long-run relation between inflation and output (and employment), for low inflation rates. This Phillips curve relation, together with an inefficient zero-inflation steady state, provides a rationale for a positive long-run inflation rate. Given standard calibrations, optimal monetary policy is associated with a long-run inflation rate around 2 percent.

Keywords: Dynamic latent variable model, Importance sampling, Marginalized likelihood, Mixture, Monte Carlo, Realized Volatility, Stochastic volatility

JEL classification: C15

 

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