Rotemberg, JulioOverview
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Most widely held works by
Julio Rotemberg
NBER macroeconomics annual 1998
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7 editions published between 1998 and 1999 in English and held by 1,229 WorldCat member libraries worldwide
NBER macroeconomics annual 1999
by National Bureau of Economic Research
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4 editions published in 2000 in English and held by 1,160 WorldCat member libraries worldwide
Perceptions of equity and the distribution of income
by Julio Rotemberg
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9 editions published in 1996 in English and held by 89 WorldCat member libraries worldwide This paper builds a simple model where there is a link between employees' perception of the fairness of employers and the actual distribution of income. Wages are based in part on employers' assessments of the productivity of individual employees. I show that the equilibrium distribution of income depends on the beliefs of employees concerning the accuracy of these evaluations. I give conditions under which the distribution of income across employees of the same vintage is more equal if employees believe that these evaluations are generally inaccurate (so that they are skeptical of capitalists in general) than when they believe that these evaluations are accurate. The model is consistent with the fact that, in a sample of seven countries, the distribution of income is more unequal in countries where people feel that income inequality is not too large
Cyclical movements in wages and consumption in a bargaining model of unemployment
by Julio Rotemberg
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9 editions published in 1998 in English and held by 88 WorldCat member libraries worldwide This paper considers a model where individual workers bargain with firms over their wages and where their bargaining power is so strong that some workers are unemployed. The result is that an increase in the elasticity of demand facing individual firms raises employment (as in the case where the labor market clears) but that wages rise only modestly. In fact, consistent with the findings of Wilson (1997), some jobspecific wages actually fall. Nonetheless, average wages may rise either because wages of nonrationed workers rise or because there is cyclical upgrading of jobs. Assuming that workers are also rationed in financial markets, the increase in employment that accompanies the increase in the demand elasticity for individual products also increases consumption substantially. Thus, the model rationalizes the finding that real wages rise less in booms than does consumption. At the same time, the model is consistent with a lack of secular movements in hours and unemployment as well as a secular proportionality of consumption and real wages
The cyclical behavior of prices and costs
by Julio Rotemberg
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13 editions published between 1998 and 1999 in English and held by 87 WorldCat member libraries worldwide Because inputs are scarce, marginal cost should be an increasing function of output. Without changes in this real marginal cost schedule, aggregate output can vary if and only if the markup of price over marginal cost varies. In this review, we discuss the extent to which observed fluctuations in aggregate economic activity depend upon such variations in average markups. We first study whether, empirically, real marginal cost rises in cyclical expansions. Average real labor cost is not very procyclical, but, for reasons such as overhead labor and adjustment costs, marginal labor cost should be more procyclical. Measures of marginal cost based on materials costs and inventories also appear procyclical. We next show that countercyclical markup variation may, depending upon how costs are modeled, account for a substantial fraction of cyclical output movements. We also show that the observed procyclical variations in productivity and profits are consistent with the hypothesis that cyclical variations in output are primarily due to markup variations than to shifts in the real marginal cost schedule. Finally, we survey theories of endogenous markup variation. These include both models of sticky and models in which firms' desired markup varies over time
Imperfect competition and the effects of energy price increases on economic activity
by Julio Rotemberg
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11 editions published between 1992 and 1996 in English and held by 83 WorldCat member libraries worldwide We show that modifying the standard neoclassical growth model by assuming that competition is imperfect makes it easier to explain the size of the declines in output and real wages that follow increases in the price of oil. Plausibly parameterized models of this type are able to mimic the response of output and real wages in the United States. The responses are particularly consistent with a model of implicit collusion where markups depend positively on the ratio of the expected present value of future profits to the current level of output
Is the business cycle a necessary consequence of stochastic growth?
by Julio Rotemberg
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10 editions published in 1994 in English and held by 79 WorldCat member libraries worldwide We compute the forecastable changes in output, consumption, and hours implied by a VAR that includes the growth rate of private value added, the share of output that is consumed, and the detrended level of private hours. We show that the size of the forecastable changes in output greatly exceeds that predicted by a standard stochastic growth model, of the kind studied by real business cycle theorists. Contrary to the model's implications, forecastable movements in labor productivity are small and only weakly related to forecasted changes in output. Also, forecasted movements in investment and hours are positively correlated with forecasted movements in output. Finally, and again in contrast to what the growth model implies, forecasted output movements are positively related to the current level of the consumption share and negatively related to the level of hours. We also show that these contrasts between the model and the observations are robust to allowance for measurement error and a variety of other types of transitory disturbances
Prices, output and hours : an empirical analysis based on a sticky price model
by Julio Rotemberg
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8 editions published in 1994 in English and held by 79 WorldCat member libraries worldwide I show that a simple sticky price model based on Rotemberg (1982) is consistent with a variety of facts concerning the correlation of prices, hours and output. In particular, I show that it is consistent with a negative correlation between the detrended levels of output and prices when the BeveridgeNelson method is used to detrend both the price and output data. Such a correlation, i.e., a negative correlation between the predictable movements in output and the predictable movements in prices is present (and very strong) in U.S. data. Consistent with the model, this correlation is stronger than correlations between prices and hours of work. I also study the size of the predictable price movements that are associated with predictable output movements as well as the degree to which there are predictable movements in monetary aggregates associated with predictable movements in output. These facts are used to shed light on the degree to which the Federal Reserve has pursued a policy designed to stabilize expected inflation
A heuristic method for extracting smooth trends from economic time series
by Julio Rotemberg
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9 editions published in 1999 in English and held by 75 WorldCat member libraries worldwide This paper proposes a method for separating economic time series into a smooth component whose mean varies over time (the trend') and a stationary component (the cycle'). The aim is to make the trends as smooth as possible while also producing cycles with plausible properties. While the main justification for the method is intuitive, the method does a good job of separating these two components in some artificial examples where the constructed series are indeed the sum of smooth (possibly stochastic) functions of time and a low order autoregressive process. When the true trends consist of low order polynomials, the proposed method obtains trends that are of similar accuracy than fitted polynomial trends. In other cases, the MSE of the proposed trends is much lower. Similarly, except in quite special cases, the MSE of the proposed trend is considerably smaller than that obtained by the HP filter. VARs that involve the cyclical variables constructed by this method yield accurate representations of the behavior of the underlying cycles of several variables. By contrast, VARs with the series in differences give poor descriptions of the effect of cyclical shocks, even though DickeyFuller tests do not reject the hypotheses that the artificial series have unit roots. I apply the method to some well known aggregate time series. The results suggest that real wages in the U.S. are strongly positively correlated with military purchases and that the reduction in the growth of trend GDP in the U.S. started well before 1973
Stochastic technical progress, nearly smooth trends and distinct business cycles
by Julio Rotemberg
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9 editions published in 2002 in English and held by 72 WorldCat member libraries worldwide This paper investigates whether it is possible to entertain simultaneously two attractive views about US GDP. The first is that long term growth in US GDP is attributable to an empirically plausible specification of random technical progress. The second is that deviations of GDP from a fitted smooth 'trend' are mostly attributable to shocks that have only temporary effects, so that they are unrelated to the shocks to technical progress that lead to long term growth. The paper shows that these two views are not incompatible by constructing a model where stochastic technical progress (whose properties are calibrated to fit some features of US data) has essentially no effect on suitably detrended time series of GDP. The paper also studies variations in wedges between price and marginal cost that are capable of giving rise to these transitory movements
Customer anger at price increases, time variation in the frequency of price changes and monetary policy
by Julio Rotemberg
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8 editions published in 2002 in English and held by 71 WorldCat member libraries worldwide While much evidence suggests tha price rigidity is due to a concern with the reaction of customers, price increases do not seem to be typically associated with drastic reduction in purchases. To explain this apparent inconsistency, this paper develops a model where consumers care about the fairness of prices and react negatively only when they become convinced that prices are unfair. This leads to price rigidity, though the implications of the model are not identical to those of existing models of costly price adjustment. In particular, the frequency of price adjustment ought to depend on economywide variables observed by consumers. As I show, this has implications for the effects of monetary policy. It can, in particular, explain why inflation does not fall immediately after a monetary tightening
Commercial policy with altruistic voters
by Julio Rotemberg
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10 editions published in 2000 in English and held by 70 WorldCat member libraries worldwide This paper considers a specific factor model with two sectors in which agents are altruistic towards domestic residents. I show that, even if the degree of altruism is small, direct democracy leads to commercial policies that are biased against trade as long as the mobile factor is unbiased in the sense of Jones and Ruffin (1977) and the income of the owners of the factor which is specific to the import competing sector is lower than the income of the owners of the other specific factor. Tariffs may be preferred to subsidies by the median voter if subsidies require that beneficiaries spend a fixed cost to demonstrate that they are entitled to these subsidies and there is heterogeneity in the size of producers. Lastly, I construct a model of indirect democracy where legislators can receive campaign contributions from potential lobbyists. Even if campaign contributions are positive in equilibrium, the tariffs that emerge from votes taken after lobbying can represent the wishes of the median voter. In this model, campaign contributions do not buy votes. Instead, consistent with what is claimed in the qualitative literature, they buy access to legislators' time. The model is also consistent with the evidence showing that campaign contributions and lobbying activity are directed mainly at legislators who already agree with their contributors and their lobbyists
Dynamic general equilibrium models with imperfectly competitive product markets
by Julio Rotemberg
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12 editions published between 1992 and 1995 in English and held by 70 WorldCat member libraries worldwide This paper discusses the consequences of introducing imperfectly competitive product markets into an otherwise standard neoclassical growth model. We pay particular attention to the consequences of imperfect competition for the explanation of fluctuations in aggregate economic activity. Market structures considered include monopolistic competition, the 'customer market' model of Phelps and Winter, and the implicit collusion model of Rotemberg and Saloner. Empirical evidence relevant to the numerical calibration of imperfectly competitive models is reviewed. The paper then analyzes the effects of imperfect competition upon the economy's response to several kinds of real shocks, including technology shocks, shocks to the level of government purchases, and shocks that change individual producers' degree of market power. It also discusses the role of imperfect competition in allowing for fluctuations due solely to selffulfilling expectations
Energy taxes and aggregate economic activity
by Julio Rotemberg
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10 editions published in 1993 in English and held by 69 WorldCat member libraries worldwide This paper shows that the output losses from energy taxes are significantly larger than usually computed when due account is taken of imperfect competition among energy using firms. Even with perfect competition among these firms, the loss in GNP is of the same order of magnitude as the revenue raised by these taxes. However, in the presence of imperfect competition the output losses are much higher. There are particularly large transitory losses in the immediate aftermath of energy price increases when firms act as implicitly colluding oligopolists. These losses become considerably smaller if energy taxes are phasedin. We also show that taxes that affect only household consumption of energy have much smaller effects. In particular, for the empirically plausible parameter values we consider, such taxes have no effect on employment or output in the nonenergy sector
Interestrate rules in an estimated sticky price model
by Julio Rotemberg
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5 editions published between 1998 and 1999 in English and held by 65 WorldCat member libraries worldwide This paper evaluates alternative rules by which the Fed may set interest rates using the small model of the U.S. economy estimated in Rotemberg and Woodford (1997). Our main substantive finding is that low and stable inflation together with stable interest rates can be achieved by letting the funds rate respond positively to inflation while also responding, with a coefficient bigger than one, to the lagged funds rate itself. A rule in which the interest rate is set in this extremely simple way does almost as well as a more complicated rule which is optimal in our setting, in the sense of maximizing expected utility to the representative household. Furthermore, when the funds rate responds to inflation only with a delay, due to delay in the availability of inflation data, performance under the rule is only slightly reduced
Fair pricing
by Julio Rotemberg
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6 editions published in 2004 in English and held by 65 WorldCat member libraries worldwide "I suppose that consumers see a firm as fair if they cannot reject the hypothesis that the firm is somewhat benevolent towards them. Consumers that can reject this hypothesis become angry, which is costly to the firm. I show that firms that wish to avoid this anger will keep their prices rigid under some circumstances when prices would vary under more standard assumptions. The desire to appear benevolent can also lead firms to practice both thirddegree and intertemporal price discrimination. Thus, the observation of temporary sales is consistent with my model of fair prices. The model can also explain why prices seem to be more responsive to changes in factor costs than to changes in demand that have the same effect on marginal cost, why increases in inflation seem to affect mostly the frequency of price adjustment without having sizeable effects on the size of price increases and why firms often announce their intent to increase prices in advance of actually doing so"National Bureau of Economic Research web site
Cyclical wages in a searchandbargaining model with large firms
by Julio Rotemberg
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13 editions published in 2006 in English and held by 64 WorldCat member libraries worldwide "This paper presents a complete general equilibrium model with flexible wages where the degree to which wages and productivity change when cyclical employment changes is roughly consistent with postwar U.S. data. Firms with market power are assumed to bargain simultaneously with many employees, each of whom finds himself matched with a firm only after a process of search. When employment increases as a result of reductions in market power, the marginal product of labor falls. This fall tempers the bargaining power of workers and thus dampens the increase in their real wages. The procyclical movement of wages is dampened further if the posting of vacancies is subject to increasing returns"National Bureau of Economic Research web site
Money, output and prices : evidence from a new monetary aggregate
by Julio Rotemberg
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9 editions published between 1991 and 1996 in English and Undetermined and held by 50 WorldCat member libraries worldwide This paper develops a new utilitybased monetary aggregate which we label the currency equivalent aggregate. This aggregate equals the stock of currency that would be required for households to obtain the same liquidity services that they get from their entire collection of monetary assets. We compare the ability of the new aggregate and conventional aggregates, such as Ml and M2, and other indicators of monetary policy to forecast real activity. The CE aggregate has more predictive power for output and prices than standard aggregates, and the time path of the estimated output response is more consistent with broad classes of theoretical models
Target zones with limited reserves
by Paul R Krugman
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7 editions published between 1989 and 1990 in English and held by 49 WorldCat member libraries worldwide Abstract: Like a fixed exchange rate, a target zone system may be subject to
Cyclical markups : theories and evidence
by Julio Rotemberg
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7 editions published in 1990 in English and held by 48 WorldCat member libraries worldwide If changes in aggregate demand were an important source of macroeconomic fluctuations, real wages would be countercyclical unless markups of price over marginal cost were themselves countercyclical. We thus examine three theories of markup variation at cyclical frequencies. The first assumes only that the elasticity of demand is a function of the level of output. In the second, firma face a tradeoff between exploiting their existing customers and attracting new customers. Markups then depend also on rates of return and future sales expectations; a high rate of return or expectations of low sales growth lead firms to assign a lower value to future revenues from new customers. Firma thus raise prices and markups. In the third theory, markups are chosen to ensure that no one deviates from an (implicitly) collusive understanding. Increases in rates of return or pessimistic expectations then lead firms to be less concerned with future punishments so that markups fall. Aggregate postwar data from the U.S. are moat consistent with the predictions of the implicit collusion model more
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AltruismEconomic aspects Business cycles Business cyclesEconometric models Business cyclesMathematical models Collective bargainingMathematical models Commercial policyPublic opinion Competition Competition, ImperfectEconometric models CompetitionEconometric models Consumer behaviorMathematical models Consumption (Economics)Econometric models Consumption (Economics)Mathematical models Econometrics Equilibrium (Economics) Equilibrium (Economics)Econometric models Federal funds market (United States) Foreign exchangeMathematical models Gold standardMathematical models Gross domestic product Heuristic Hours of laborEconometric models IncomePublic opinion Industrial productivityEconometric models Inflation (Finance) Inflation (Finance)Mathematical models Interest ratesMathematical models Labor marketMathematical models LobbyingEconomic aspects Macroeconomics Markets MarketsEconometric models MarkupEconometric models MarkupMathematical models Monetary policy Monetary policyMathematical models Money supplyMathematical models Petroleum productsPricesEconometric models Petroleum productsPricesEconomic aspects PricesEconometric models PricingEconometric models Production functions (Economic theory) Public welfare Selfinterest Stochastic processes Technological innovations Timeseries analysis UnemploymentEconometric models United States WagesEconometric models WagesMathematical models

Alternative Names
Rotemberg, J. 1953
Rotemberg, J. J. 1953
Rotemberg, J. (Julio)
Rotemberg, Julio J.
Rotemberg, Julio J. 1953
Rotemberg, Julio Jacobo 1953
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