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Welfare implications of Calvo vs. Rotemberg-pricing assumptions

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  • Lombardo, Giovanni
  • Vestin, David

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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Bibliographic Info

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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Web page: http://www.elsevier.com/locate/ecolet

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Citations

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Cited by:
  1. Merola, Rossana, 2010. "Optimal monetary policy in a small open economy with financial frictions," Discussion Paper Series 1: Economic Studies 2010,01, Deutsche Bundesbank, Research Centre.
  2. Ascari, Guido & Rossi, Lorenza, 2011. "Real wage rigidities and disinflation dynamics: Calvo vs. Rotemberg pricing," Economics Letters, Elsevier, vol. 110(2), pages 126-131, February.
  3. Leith, Campbell & Moldovan, Ioana & Rossi, Raffaele, 2009. "Monetary and Fiscal Policy under Deep Habits," SIRE Discussion Papers 2009-47, Scottish Institute for Research in Economics (SIRE).
  4. Oreste Tristani & Gianni Amisano, 2010. "A nonlinear DSGE model of the term structure with regime shifts," 2010 Meeting Papers 234, Society for Economic Dynamics.
  5. Di Bartolomeo Giovanni & Tirelli Patrizio & Acocella Nicola, 2011. "Inflation targets and endogenous wage markups in a New Keynesian model," wp.comunite 0079, Department of Communication, University of Teramo.
  6. Schenkelberg, Heike, 2011. "Why are Prices Sticky? Evidence from Business Survey Data," Discussion Papers in Economics 12158, University of Munich, Department of Economics.
  7. Sienknecht, Sebastian, 2012. "Robust policy choice under Calvo and Rotemberg pricing," MPRA Paper 38201, University Library of Munich, Germany.
  8. Steffen Ahrens & Matthias Hartmann, 2014. "State-dependence vs. Time-dependence: An Empirical Multi-Country Investigation of Price Sluggishness," Kiel Working Papers 1907, Kiel Institute for the World Economy.
  9. Sergei Ivashchenko, 2013. "Dynamic stochastic general equilibrium model with banks and endogenous defaults of firms," EUSP Deparment of Economics Working Paper Series Ec-02/13, European University at St. Petersburg, Department of Economics.
  10. 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.
  11. Fagan, Gabriel & Messina, Julián, 2009. "Downward wage rigidity and optimal steady-state inflation," Working Paper Series 1048, European Central Bank.
  12. Ascari, Guido & Castelnuovo, Efrem & Rossi, Lorenza, 2011. "Calvo vs. Rotemberg in a trend inflation world: An empirical investigation," Journal of Economic Dynamics and Control, Elsevier, vol. 35(11), pages 1852-1867.
  13. Jambu, Marc-Antoine, 2010. "Has the Globalisation really generated more competition in OECD economies," MPRA Paper 19974, University Library of Munich, Germany.
  14. Annicchiarico, Barbara & Rossi, Lorenza, 2013. "Optimal monetary policy in a New Keynesian model with endogenous growth," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 274-285.
  15. Martha Misas A. & Juan Carlos Parra A. & Enrique López E., 2011. "Heterogeneidad en la fijación de precios en Colombia: análisis de sus determinantes a partir de modelos de conteo," VNIVERSITAS ECONÓMICA 008301, UNIVERSIDAD JAVERIANA - BOGOTÁ.
  16. Levine, Paul & McAdam, Peter & Pearlman, Joseph G. & Pierse, Richard, 2008. "Risk Management in Action. Robust monetary policy rules under structured uncertainty," Working Paper Series 0870, European Central Bank.

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