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Welfare implications of Calvo vs. Rotemberg-pricing assumptions

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Lombardo, Giovanni
Vestin, David

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Abstract

This paper compares the welfare implications of two widely used pricing assumptions in the New-Keynesian literature: Calvo-pricing vs. Rotemberg-pricing. We show that despite the strong similarities between the two assumptions to a first order of approximation, in general they might entail different welfare costs at higher order of approximation.

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File URL: http://www.sciencedirect.com/science/article/B6V84-4RV7Y7S-5/1/94cf148597a7401093278deba14e63e2
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 100 (2008)
Issue (Month): 2 (August)
Pages: 275-279
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Handle: RePEc:eee:ecolet:v:100:y:2008:i:2:p:275-279

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  1. Barbara Roffia & Andrea Zaghini, 2007. "Excess money growth and inflation dynamics," Working Paper Series 749, European Central Bank. [Downloadable!]
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  2. Estelle Cantillon & Pai-Ling Yin, 2007. "How and when do markets tip? Lessons from the Battle of the Bund," Working Paper Series 766, European Central Bank. [Downloadable!]
  3. Frederic Boissay & Reint Gropp, 2007. "Trade credit defaults and liquidity provision by firms," Working Paper Series 753, European Central Bank. [Downloadable!]
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  4. Paul Levine & Joseph Pearlman & Richard Pierse, 2007. "Linear-quadratic approximation, external habit and targeting rules," Working Paper Series 759, European Central Bank. [Downloadable!]
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  5. Michiel van Leuvensteijn & Jacob Bikker & Adrian van Rixtel & Christoffer Kok-Sorensen, 2007. "A new approach to measuring competition in the loan markets of the euro area," DNB Working Papers 143, Netherlands Central Bank, Research Department. [Downloadable!]
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  6. Luca Benati & Haroon Mumtaz, 2007. "U.S. evolving macroeconomic dynamics - a structural investigation," Working Paper Series 746, European Central Bank. [Downloadable!]
  7. Jukka Jalava & Ilja Kristian Kavonius, 2007. "Durable goods and their effect on household saving rations in the euro area," Working Paper Series 755, European Central Bank. [Downloadable!]
  8. Ana Lamo & Javier J. Pérez & Ludger Schuknecht, 2007. "The cyclicality of consumption, wages and employment of the public sector in the euro area," Working Paper Series 757, European Central Bank. [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Antje Berndt & Iulian Obreja, 2007. "The pricing of risk in European credit and corporate bond markets," Working Paper Series 805, European Central Bank. [Downloadable!]
  2. Maarten Dossche, 2009. "Understanding inflation dynamics : Where do we stand ?," Research series 200906-11, National Bank of Belgium. [Downloadable!]
  3. Luigi Landolfo, 2007. "Modeling the impact of external factors on the euro area’s HICP and real economy - a focus on pass-through and the trade balance," Working Paper Series 789, European Central Bank. [Downloadable!]
  4. Jiri Podpiera, 2007. "Policy rate decisions and unbiased parameter estimation in typical monetary policy rules," Working Paper Series 771, European Central Bank. [Downloadable!]
  5. Paul Levine & Peter McAdam & Joseph Pearlman & Richard Pierse, 2008. "Risk Management in Action. Robust monetary policy rules under structured uncertainty," Working Paper Series 870, European Central Bank. [Downloadable!]
  6. Campbell Leith & Ioana Moldovan & Raffaele Rossi, 2009. "Monetary and fiscal policy under deep habits," Working Papers 2009_32, Department of Economics, University of Glasgow. [Downloadable!]
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  7. Andrew T. Levin & J. David López-Salido & Edward Nelson & Tack Yun, 2008. "Macroeconometric equivalence, microeconomic dissonance, and the design of monetary policy," Working Papers 2008-035, Federal Reserve Bank of St. Louis. [Downloadable!]
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  8. Nikolaus Siegfried & Emilia Simeonova & Cristina Vespro, 2007. "Choice of currency in bond issuance and the international role of currencies," Working Paper Series 814, European Central Bank. [Downloadable!]
  9. Gabriel Fagan & Julián Messina, 2009. "Downward wage rigidity and optimal steady-state inflation," Working Paper Series 1048, European Central Bank. [Downloadable!]
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