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A note on measuring the importance of the uniform nonsynchronization hypothesis

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  • J.M.C. Santos Silva

    ()
    (ISEG/Universidade Tecnica de Lisboa)

  • Carlos Robalo Marques

    ()
    (Banco de Portugal)

  • Daniel Dias

    ()
    (Banco de Portugal and Anderson School of Management, UCLA)

Abstract

In this note we reappraise the measure of the importance of time-dependent price setting rules suggested by Klenow and Kryvtsov (2005, "State-Dependent or Time-Dependent Pricing: Does It Matter for Recent U.S. Inflation?," Bank of Canada Working Paper 05-4). Furthermore, we propose an alternative way to gauge the significance of this type of price setting behavior, which can be interpreted as an upper bound for the proportion of price trajectories which are compatible with the uniform nonsynchronization hypothesis. The merits of the proposed measure are highlighted in an application using micro-data. Our results suggest that a large proportion of price trajectories may be compatible with simple time-dependent price setting mechanisms, but the strength of this evidence very much depends on the way that is used to evaluate the importance of this type of behavior.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 4 (2007)
Issue (Month): 6 ()
Pages: 1-8

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Handle: RePEc:ebl:ecbull:eb-06d40015

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Keywords: perfect synchronization.;

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References

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  1. Dias, Daniel & Robalo Marques, Carlos & Santos Silva, João M. C., 2006. "Measuring the importance of the uniform nonsynchronization hypothesis," Working Paper Series, European Central Bank 0606, European Central Bank.
  2. repec:nbr:nberre:0126 is not listed on IDEAS
  3. Peter J. Klenow & Oleksiy Kryvtsov, 2005. "State-Dependent or Time-Dependent Pricing: Does It Matter for Recent U.S. Inflation?," Working Papers, Bank of Canada 05-4, Bank of Canada.
  4. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 88(1), pages 1-23, February.
  5. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, Elsevier, vol. 12(3), pages 383-398, September.
  6. Cecchetti, Stephen G, 1985. "Staggered Contracts and the Frequency of Price Adjustment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(5), pages 935-59, Supp..
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Cited by:
  1. Alvarez González, Luis Julián, 2008. "What Do Micro Price Data Tell Us on the Validity of the New Keynesian Phillips Curve?," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 2(19), pages 1-36.

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