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Sticky-Price Models and the Natural Rate Hypothesis Author info | Abstract | Publisher info | Download info | Related research | Statistics Javier Andrés () (Banco de España, Universidad de Valencia)
David López-Salido () (Banco de España)
Edward Nelson () (Federal Reserve Bank of St. Louis)
Additional information is available for the following
registered author(s):
A major criticism of standard specifications of price adjustment in models for monetary policy analysis is that they violate the natural rate hypothesis by allowing output to differ from potential in steady state. In this paper we estimate a dynamic optimizing business cycle model whose price-setting behavior satisfies the natural rate hypothesis. The priceadjustment specifications we consider are the sticky-information specification of Mankiw and Reis (2002) and the indexed contracts of Christiano, Eichenbaum, and Evans (2005). Our empirical estimates of the real side of the economy are similar whichever price adjustment specification is chosen. Consequently, the alternative model specifications deliver similar estimates of the U.S. output gap series, but the empirical behavior of the gap series differs substantially from standard gap estimates.
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Paper provided by Banco de España in its series Banco de España Working Papers with number
0521.
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Length: 41 pages
Date of creation: Aug 2005Date of revision:
Handle: RePEc:bde:wpaper:0521Contact details of provider: Email: Web page: http://www.bde.es/ More information through EDIRC
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References listed on IDEAS 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.: Trabandt, Mathias, 2007.
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"The economic effects of exogenous fiscal shocks in Spain: a SVAR approach ,"
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Other versions: repec:bep:maccon:v:6:y:2006:i:1:p:1374-1374 is not listed on IDEAS
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"Business demography in Spain: determinants of firm survival ,"
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