Скачать или смотреть Expectations Augmented Phillips Curve

In this video, we derive the micro founded expectations augmented Phillips curve. This comes from the optimisation problems of households and firms, coupled with a simple production function.

Check out the playlist for a number of past and future videos on the topic of business cycles.

We begin with a basic overview of what is meant by business cycles. This involves detrending the data such that we can isolate the short run cyclical effects on output.

We then develop some models for examining the propagation mechanisms involved in causing cyclical behaviour. This begins with Real Business Cycle Models. These models focus on real variables, so do not generate predictions for nominal variables. We have shocks to the supply side of the economy, causing uncertainty and fluctuations that may propagate into the future.

We then move to New Keynesian models. These introduce nominal frictions into the model, including some level of imperfect competition, normally monopolistic competition. There is then some cost involved with changing prices, often called "menu costs". These can involve costs of printing a new catalogue, but could also be extended broader to informational costs such as customers wanting a constant price, as rapidly changing prices can cause uncertainty. We the have fluctuations arising from shocks to both demand and supply sides of the economy.

We can extend these models by altering the assumptions to better capture the economy.

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