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Strategic Investment Plan for Intelligence Community Analysis

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Our results are based on model simulations, and so the credibility of the findings depends on the plausibility of our model. For the purpose of our results here, the two cornerstones of our model are sticky wages and an estimated Taylor rule. That the latter is a reasonable way to capture monetary policy has almost become axiomatic. Sticky wages have also emerged in recent years as a key feature of models that fit the data well (see, for example, the discussion in Christiano, Eichenbaum and Evans (2005).) The view that wage-setting frictions are key to understanding aggregate fluctuations is also reached by a very different type of.

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