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Contract length heterogeneity and the persistence of monetary shocks in a dynamic generalized Taylor economy

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  • Dixon, Huw
  • Kara, Engin

Abstract

We develop the generalized Taylor economy (GTE) in which there are many sectors with overlapping contracts of different lengths. In economies with the same average contract length, monetary shocks will be more persistent when longer contracts are present. Using the Bils-Klenow distribution of contract lengths, we find that the corresponding GTE tracks the U.S. data well. When we choose a GTE with the same distribution of completed contract lengths as the Calvo, the economies behave in a similar manner.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 55 (2011)
Issue (Month): 2 (February)
Pages: 280-292

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Handle: RePEc:eee:eecrev:v:55:y:2011:i:2:p:280-292

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

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Keywords: Persistence Taylor contract Calvo;

References

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Citations

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Cited by:
  1. Jósef Sigurdsson & Rannveig Sigurdardottir, 2011. "Evidence of Nominal Wage Rigidity and Wage Setting from Icelandic Microdata," Economics wp55, Department of Economics, Central bank of Iceland.
  2. Huw Dixon & Engin Kara, 2011. "Taking Multi-Sector Dynamic General Equilibrium Models to the Data," Koç University-TUSIAD Economic Research Forum Working Papers, Koc University-TUSIAD Economic Research Forum 1125, Koc University-TUSIAD Economic Research Forum.
  3. Hafedh Bouakez & Emanuela Cardia & Francisco J. Ruge-Murcia, 2009. "Sectoral Price Rigidity and Aggregate Dynamics," Cahiers de recherche, CIRPEE 0906, CIRPEE.
  4. Flamini, Alessandro & Ascari, Guido & Rossi, Lorenza, 2012. "Industrial Transformation, Heterogeneity in Price Stickiness, and the Great Moderation," Dynare Working Papers 24, CEPREMAP.
  5. Huw D. Dixon & Hervé Le Bihan, 2010. "Generalized Taylor and Generalized Calvo Price and Wage-Setting: Micro Evidence with Macro Implications," CESifo Working Paper Series 3119, CESifo Group Munich.
  6. Engin Kara, 2012. "Using Micro Data on Prices to Improve Business Cycle Models," Bristol Economics Discussion Papers 12/632, Department of Economics, University of Bristol, UK.
  7. Engin Kara, 2011. "Understanding and Modelling Reset Price Inflation," Bristol Economics Discussion Papers 11/623, Department of Economics, University of Bristol, UK.

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