Is the Galí–Gertler model too simplistic for real economies?
While our models are necessarily stylized to isolate core economic forces, they are designed to be empirically relevant. The Galí–Gertler model, for instance, incorporates key frictions that are empirically validated. The goal is not to perfectly replicate every detail of the economy, but to build a robust framework that captures the essential dynamics of inflation and business cycles. This allows for clear policy implications and robust inference from data, even if the models themselves are simplified representations.
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