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In economics, divine coincidence refers to the property of New Keynesian models that there is no trade-off between the stabilization of inflation and the stabilization of the welfare-relevant output gap for central banks. This property is attributed to a feature of the model, namely the absence of real imperfections such as real wage rigidities. Conversely, if New Keynesian models are extended to account for these real imperfections, divine coincidence disappears and central banks again face a trade-off between inflation and output gap stabilization. The definition of divine coincidence is usually attributed to the seminal article by Olivier Blanchard and Jordi Galí in 2007.
References
- 1 2 Mankiw, N. Gregory. "15, Aggregate demand and aggregate supply". Brief Principles of Macroeconomics (5 ed.). p. 353. ISBN 978-0-324-59037-1.
- ↑ Shiller, Robert J. (8 February 2022). "Opinion - Inflation Is Not a Simple Story About Greedy Corporations". The New York Times. Retrieved 21 June 2022.
- ↑ Hearings. United States Congress House Committee on Banking and Currency. 1970. p. 100. Retrieved 21 June 2022.
- ↑ Mitchell, Daniel J.B.; Erickson, Christopher L. "The Wage-Price Spiral: From Push to Shove" (PDF). Retrieved 21 June 2022.
- ↑ Blanchard, Olivier J. (December 1985). "The Wage Price Spiral". National Bureau of Economic Research. Retrieved 21 June 2022.
{{cite journal}}: Cite journal requires|journal=(help) - ↑ "Don't swallow Tory myth of the 'wage-price spiral'". Socialist Worker. 20 June 2022. Retrieved 21 June 2022.
- ↑ Blakeley, Grace. "The Wage-Price Spiral Is a Myth". tribunemag.co.uk. Retrieved 21 June 2022.
- 1 2 Friedman, Milton (2005). "How not to stop inflation". Econ Focus. Federal Reserve Bank of Richmond. 9: 2–7. Retrieved 21 June 2022.