IDEAS home Printed from https://ideas.repec.org/a/kap/atlecj/v47y2019i1d10.1007_s11293-019-09613-w.html
   My bibliography  Save this article

A New Keynesian Model with Robots: Implications for Business Cycles and Monetary Policy

Author

Listed:
  • Tsu-ting Tim Lin

    (Gettysburg College)

  • Charles L. Weise

    (Gettysburg College)

Abstract

This paper examines the effects of labor-replacing capital, referred to as robots, on business cycle dynamics using a New Keynesian model with a role for both traditional and robot capital. This study finds that shocks to the price of robots have effects on wages, output, and employment that are distinct from shocks to the price of traditional capital. Further, the inclusion of robots alters the response of employment and labor’s share to total factor productivity and monetary policy shocks. The presence of robots also weakens the correlation between human labor and output and the correlation between human labor and labor’s share. The paper finds that monetary policymakers would need to place a greater emphasis on output stabilization if their objective is to minimize a weighted average of output and inflation volatility. Moreover, if policymakers have an employment stabilization objective apart from their output stabilization objective, they would have to further focus on output stabilization due to the deterioration of the output-employment correlation.

Suggested Citation

  • Tsu-ting Tim Lin & Charles L. Weise, 2019. "A New Keynesian Model with Robots: Implications for Business Cycles and Monetary Policy," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 47(1), pages 81-101, March.
    • Handle: RePEc:kap:atlecj:v:47:y:2019:i:1:d:10.1007_s11293-019-09613-w
    DOI: 10.1007/s11293-019-09613-w
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11293-019-09613-w
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11293-019-09613-w?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Justiniano, Alejandro & Primiceri, Giorgio E. & Tambalotti, Andrea, 2010. "Investment shocks and business cycles," Journal of Monetary Economics, Elsevier, vol. 57(2), pages 132-145, March.
    2. Frank Smets & Raf Wouters, 2005. "Comparing shocks and frictions in US and euro area business cycles: a Bayesian DSGE Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 161-183.
    3. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
    4. Steve Ambler & Emanuela Cardia, 1998. "The Cyclical Behaviour of Wages and Profits under Imperfect Competition," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 148-164, February.
    5. Gomme, Paul & Greenwood, Jeremy, 1995. "On the cyclical allocation of risk," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 91-124.
    6. Olivier Blanchard & Jordi Galí, 2007. "Real Wage Rigidities and the New Keynesian Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 35-65, February.
    7. repec:adr:anecst:y:2009:i:95-96:p:13 is not listed on IDEAS
    8. Sekyu Choi & José-Víctor Rios-Rull, 2009. "Understanding the Dynamics of the Labor Share: the Role of non-Competitive Factor Prices," Annals of Economics and Statistics, GENES, issue 95-96, pages 251-277.
    9. Gary D. Hansen & Edward C. Prescott, 2005. "Capacity constraints, asymmetries, and the business cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(4), pages 850-865, October.
    10. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pablo Casas & José L. Torres, 2024. "Government size and automation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(3), pages 780-807, June.
    2. Pablo Casas & José L. Torres, 2023. "Automation, automatic capital returns, and the functional income distribution," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 32(1), pages 113-135, January.
    3. Stähler, Nikolai, 2021. "The Impact of Aging and Automation on the Macroeconomy and Inequality," Journal of Macroeconomics, Elsevier, vol. 67(C).
    4. Germana Bottone, 2018. "A tax on robots? Some food for thought," Working Papers wp2018-3, Ministry of Economy and Finance, Department of Finance.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ríos-Rull, José-Víctor & Santaeulàlia-Llopis, Raül, 2010. "Redistributive shocks and productivity shocks," Journal of Monetary Economics, Elsevier, vol. 57(8), pages 931-948, November.
    2. Mauro Costantini & Ulrich Gunter & Robert M. Kunst, 2017. "Forecast Combinations in a DSGE‐VAR Lab," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 36(3), pages 305-324, April.
    3. Nucci, Francesco & Riggi, Marianna, 2018. "Labor force participation, wage rigidities, and inflation," Journal of Macroeconomics, Elsevier, vol. 55(C), pages 274-292.
    4. Christoffel, Kai & Kuester, Keith & Linzert, Tobias, 2009. "The role of labor markets for euro area monetary policy," European Economic Review, Elsevier, vol. 53(8), pages 908-936, November.
    5. Andrei Polbin & Sergey Drobyshevsky, 2014. "Developing a Dynamic Stochastic Model of General Equilibrium for the Russian Economy," Research Paper Series, Gaidar Institute for Economic Policy, issue 166P, pages 156-156.
    6. Dusan Stojanovic, 2023. "Quantitative Easing in the Euro Area: Implications for Income and Wealth Inequality," CERGE-EI Working Papers wp760, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    7. Gregory De Walque & Olivier Pierrard & Henri Sneessens & Raf Wouters, 2009. "Sequential Bargaining in a Neo-Keynesian Model with Frictional Unemployment and Staggered Wage Negotiations," Annals of Economics and Statistics, GENES, issue 95-96, pages 223-250.
    8. Susanto Basu & Pierre De Leo, 2016. "Should Central Banks Target Investment Prices?," Boston College Working Papers in Economics 910, Boston College Department of Economics, revised 04 May 2017.
    9. Mikael Carlsson & Oskar Nordstrom Skans, 2012. "Evaluating Microfoundations for Aggregate Price Rigidities: Evidence from Matched Firm-Level Data on Product Prices and Unit Labor Cost," American Economic Review, American Economic Association, vol. 102(4), pages 1571-1595, June.
    10. Francesco Furlanetto & Paolo Gelain & Marzie Taheri Sanjani, 2021. "Output Gap, Monetary Policy Trade-offs, and Financial Frictions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 41, pages 52-70, July.
    11. Serdar Kabaca, 2011. "Labor Share Fluctuations in Emerging Markets: The Role of the Cost of Borrowing," Koç University-TUSIAD Economic Research Forum Working Papers 1122, Koc University-TUSIAD Economic Research Forum.
    12. Hernando Zuleta, 2007. "Biased technological change, human capital and factor shares," Documentos de Trabajo 4380, Universidad del Rosario.
    13. Gregory De Walque & Thomas Lejeune & Yuliya Rychalovska & Rafael Wouters, 2017. "An estimated two-country EA-US model with limited exchange rate pass-through," Working Paper Research 317, National Bank of Belgium.
    14. Andrés, Javier & Burriel, Pablo, 2018. "Inflation and optimal monetary policy in a model with firm heterogeneity and Bertrand competition," European Economic Review, Elsevier, vol. 103(C), pages 18-38.
    15. Andrea Ajello, 2016. "Financial Intermediation, Investment Dynamics, and Business Cycle Fluctuations," American Economic Review, American Economic Association, vol. 106(8), pages 2256-2303, August.
    16. Rotemberg, Julio J. & Woodford, Michael, 1999. "The cyclical behavior of prices and costs," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 16, pages 1051-1135, Elsevier.
    17. Tonni, Lorenzo, 2022. "Business cycle and factor income shares: a VAR sign restriction approach," MPRA Paper 114586, University Library of Munich, Germany.
    18. Claire A. Reicher, 2016. "Matching labor’s share in a search and matching model," Empirical Economics, Springer, vol. 50(4), pages 1229-1254, June.
    19. Tonni, Lorenzo, 2023. "Business cycle and factor income shares: a VAR sign restrictions approach," MPRA Paper 116527, University Library of Munich, Germany.
    20. repec:bla:scotjp:v:56:y:2009:i:s1:p:415-442 is not listed on IDEAS
    21. Dimitris Papageorgiou, 2014. "BoGGEM: a dynamic stochastic general equilibrium model for policy simulations," Working Papers 182, Bank of Greece.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:atlecj:v:47:y:2019:i:1:d:10.1007_s11293-019-09613-w. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.