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Firm-specific production factors in a DSGE model with Taylor price setting Author info | Abstract | Publisher info | Download info | Related research | Statistics Gregory de Walque () (National Bank of Belgium, Research Department)
Frank Smets () (ECB, CEPR and University of Ghent)
Raf Wouters () (National Bank of Belgium, Research Department)
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registered author(s):
This paper compares the Calvo model with a Taylor contracting model in the context of the Smets-Wouters (2003) Dynamic Stochastic General Equilibrium (DSGE) model. In the Taylor price setting model, we introduce firm-specific production factors and discuss how this assumption can help to reduce the estimated nominal price stickiness. Furthermore, we show that a Taylor contracting model with firm-specific capital and sticky wage and with a relatively short price contract length of four quarters is able to outperform, in terms of empirical fit, the standard Calvo model with homogeneous production factors and high nominal price stickiness. In order to obtain this result, we need very large real rigidities either in the form of a huge (constant) elasticity of substitution between goods or in the form of an elasticity of substitution that is endogenous and very sensitive to the relative price.
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Paper provided by National Bank of Belgium in its series Research series with number
200606-1.
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Length: 41 pages
Date of creation: Jun 2006Date of revision:
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Keywords: Inflation persistence DSGE models Other versions of this item:
Article Paper Gregory de Walque & Frank Smets & Rafael Wouters, 2006.
"Firm-specific production factors in a DSGE model with Taylor price setting ,"
Working Paper Series
648, European Central Bank.
[Downloadable!] de Walque, Gregory & Smets, Frank & Wouters, Rafael, 2006.
"Firm-Specific Production Factors in a DSGE Model with Taylor Price Setting ,"
MPRA Paper
810, University Library of Munich, Germany.
[Downloadable!] Find related papers by JEL classification: E1 - Macroeconomics and Monetary Economics - - General Aggregative Models E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
This paper has been announced in the following NEP Reports :
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Working Paper Series
176, Sveriges Riksbank (Central Bank of Sweden).
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"Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy ,"
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8403, National Bureau of Economic Research, Inc.
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references Cited by : (explanations , 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.)
M. Dossche & F. Heylen & D. Van Den Poel, 2006.
"The Kinked Demand Curve and Price Rigidity : Evidence from Scanner Data ,"
Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium
06/429, Ghent University, Faculty of Economics and Business Administration.
[Downloadable!]
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