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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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