2 votes

About marginal cost setting on Jordi Gali's work

The equation is in logs. Thus, $$MC_{t}=\frac{W_{t}/P_{t}}{MPN_{t}}$$ $$mc_{t} = w_{t}-p_{t}-mpn_{t}$$ And after that use $$MPN_{t} = (1-\alpha)\frac{Y_{t}}{N_{t}} = (1-\alpha)A_{t}N_{t}^{-\alpha}$$ ...
1 vote

What are the major flaws of the RBC model and how does the New Keynesian model address them?

Following Galí (2015, p.3) the RBC model rests in three major assumptions: i) the efficiency of business cycle, ii) technology shocks as source of economic fluctuations, iii) the limited role of ...
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