Advanced Search
MyIDEAS: Login to save this paper or follow this series

Understanding and Modelling Reset Price Inflation

Contents:

Author Info

  • Engin Kara

    ()

Abstract

Bils, Klenow and Malin (forthcoming) (BKM) constructed a measure of reset price inflation (i.e. the rate of change of all "desired" prices) for the US. They argue that the existing pricing models cannot explain the observed reset inflation and aggregate inflation. In this paper, I show that a model that can account for the heterogeneity in contract lengths we observe in the data matches the data on both series. I also show that the BKM measure of reset inflation is a flawed measure of the concept they wish to measure and can be quite misleading.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.efm.bris.ac.uk/economics/working_papers/pdffiles/dp11623.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 11/623.

as in new window
Length: 32 pages
Date of creation: Nov 2011
Date of revision:
Handle: RePEc:bri:uobdis:11/623

Contact details of provider:
Postal: 8 Woodland Road, Bristol, BS8 1TN
Phone: 0117 928 8415
Fax: 0117 928 8577
Email:
Web page: http://www.efm.bris.ac.uk/
More information through EDIRC

Related research

Keywords: DSGE models; reset inflation; GE; Calvo; price-level targeting.;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Pete Klenow & Ben Malin & Mark Bils, 2010. "Reset Price Inflation and the Impact of Monetary Policy Shocks," 2010 Meeting Papers, Society for Economic Dynamics 1079, Society for Economic Dynamics.
  2. Peter J. Klenow & Oleksiy Kryvtsov, 2007. "State-Dependent or Time-Dependent Pricing: Does It Matter for Recent U.S. Inflation?," Discussion Papers, Stanford Institute for Economic Policy Research 07-007, Stanford Institute for Economic Policy Research.
  3. Frank Smets & Rafael Wouters, 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," American Economic Review, American Economic Association, American Economic Association, vol. 97(3), pages 586-606, June.
  4. Gorodnichenko, Yuriy & Shapiro, Matthew D., 2007. "Monetary policy when potential output is uncertain: Understanding the growth gamble of the 1990s," Journal of Monetary Economics, Elsevier, Elsevier, vol. 54(4), pages 1132-1162, May.
  5. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 123(4), pages 1415-1464, November.
  6. Robert J. Shiller, 1991. "Arithmetic Repeat Sales Price Estimators," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 971, Cowles Foundation for Research in Economics, Yale University.
  7. Levin, Andrew T. & David López-Salido, J. & Nelson, Edward & Yun, Tack, 2008. "Macroeconometric equivalence, microeconomic dissonance, and the design of monetary policy," Journal of Monetary Economics, Elsevier, Elsevier, vol. 55(Supplemen), pages S48-S62, October.
  8. Huw Dixon & Engin Kara, 2005. "How to Compare Taylor and Calvo Contracts: a comment on Michael Kiley," CDMA Working Paper Series, Centre for Dynamic Macroeconomic Analysis 200504, Centre for Dynamic Macroeconomic Analysis.
  9. Rochelle M. Edge, 2001. "Online Appendix to "The Equivalence of Wage and Price Staggering in Monetary Business Cycle Models"," Technical Appendices, Review of Economic Dynamics edge01, Review of Economic Dynamics.
  10. Walsh, Carl E., 2005. "Endogenous objectives and the evaluation of targeting rules for monetary policy," Journal of Monetary Economics, Elsevier, Elsevier, vol. 52(5), pages 889-911, July.
  11. Levin, Andrew T., 2005. "Comment on: "Endogenous objectives and the evaluation of targeting rules for monetary policy"," Journal of Monetary Economics, Elsevier, Elsevier, vol. 52(5), pages 913-919, July.
  12. Kara, Engin, 2006. "Optimal monetary policy in the generalized Taylor economy," Working Paper Series, European Central Bank 0673, European Central Bank.
  13. Dixon, Huw, 2006. "The distribution of contract durations across firms: a unified framework for understanding and comparing dynamic wage and price setting models," Working Paper Series, European Central Bank 0676, European Central Bank.
  14. Huw Dixon & Engin Kara, 2010. "Can We Explain Inflation Persistence in a Way that Is Consistent with the Microevidence on Nominal Rigidity?," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 42(1), pages 151-170, 02.
  15. Dixon, Huw & Kara, Engin, 2011. "Contract length heterogeneity and the persistence of monetary shocks in a dynamic generalized Taylor economy," European Economic Review, Elsevier, Elsevier, vol. 55(2), pages 280-292, February.
  16. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 112(5), pages 947-985, October.
  17. Juillard, Michel, 1996. "Dynare : a program for the resolution and simulation of dynamic models with forward variables through the use of a relaxation algorithm," CEPREMAP Working Papers (Couverture Orange), CEPREMAP 9602, CEPREMAP.
  18. Rochelle M. Edge, 2000. "The equivalence of wage and price staggering in monetary business cycle models," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 672, Board of Governors of the Federal Reserve System (U.S.).
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Etienne Gagnon & David L�pez-Salido & Nicolas Vincent, 2013. "Individual Price Adjustment along the Extensive Margin," NBER Macroeconomics Annual, University of Chicago Press, University of Chicago Press, vol. 27(1), pages 235 - 281.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bri:uobdis:11/623. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jonathan Temple).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.