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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. Huw Dixon & Engin Kara, 2011. "Taking Multi-Sector Dynamic General Equilibrium Models to the Data," Bristol Economics Discussion Papers 11/621, Department of Economics, University of Bristol, UK.
  2. BOUAKEZ, Hafedh & CARDIA, Emanuela & RUGE-MURCIA, Francisco J., 2009. "Sectoral Price Rigidity and Aggregate Dynamics," Cahiers de recherche 01-2009, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  3. Huw Dixon & Hervé Le Bihan, 2012. "Generalised Taylor and Generalised Calvo Price and Wage Setting: Micro‐evidence with Macro Implications," Economic Journal, Royal Economic Society, vol. 122(560), pages 532-554, 05.
  4. Flamini, Alessandro & Ascari, Guido & Rossi, Lorenza, 2012. "Industrial Transformation, Heterogeneity in Price Stickiness, and the Great Moderation," Dynare Working Papers 24, CEPREMAP.
  5. 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.
  6. Engin Kara, 2011. "Understanding and Modelling Reset Price Inflation," Bristol Economics Discussion Papers 11/623, Department of Economics, University of Bristol, UK.
  7. 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.

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