At its heart, the framework is based on the importance of sluggish adjustment in (some) nominal wages and prices to changing economic conditions. This sluggishness undoubtedly reflects a number of factors, which include the costs of adjusting  1  Michael Kiley, of the Board's staff, contributed to these remarks.
At the Federal Reserve, we have considerable interest in credit risk and credit derivatives. As these markets develop and become more complete, they facilitate risk transfer and diversification, thereby increasing the resilience of our financial system. With participants coming to rely more on these markets to manage risk, we have focused increasingly on their liquidity and structure.