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Prices and Unit Labor Costs: a New Test of Price Stickiness

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Listed:
  • Sbordone, A.M.

Abstract

This paper investigates the predictions of a simple optimizing model of nominal price rigidity for the aggregate price level and the dynamics of inflation. The author compares the model's predictions with those of a perfectly competitive, flexible price 'benchmark' model (corresponding to the model of pricing assumed in standard real business cycle models), and evaluate how much the introduction of nominal rigidities improves the model's fit with the data.

Suggested Citation

  • Sbordone, A.M., 1998. "Prices and Unit Labor Costs: a New Test of Price Stickiness," Papers 653, Stockholm - International Economic Studies.
    • Handle: RePEc:fth:stocin:653
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    More about this item

    Keywords

    ECONOMIC MODELS ; PREVISIONS ; PRICES;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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