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Staggered Price Setting and Endogenous Persistence

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Author Info
Paul R. Bergin
Robert C. Feenstra

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Abstract

This paper generates persistent effects of a monetary disturbance in the context of staggered price-setters. Previous research has been restricted by the CES functional form to price-setting rules that are constant markups over marginal costs. The present paper considers a translog form for preferences and an input-output structure for production in the context of a dynamic general equilibrium model of monopolistically competitive staggered price-setters. We derive a price-setting rule that is a function of marginal cost and also competitors' prices. This rule better captures the interaction of price-setters envisioned in Taylor (1980) and Blanchard (1983) in their early work on staggered contracts. The model is able to generate reasonable persistence, and also confirms the conjecture of Taylor and Blanchard that increasing the number of contracting groups increases the degree of persistence.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6492.

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Date of creation: Apr 1998
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Handle: RePEc:nbr:nberwo:6492

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Find related papers by JEL classification:
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

References listed on IDEAS
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  2. Khosla, Anil, 1991. "Exchange rate pass-through and export pricing evidence from the Japanese Economy," Journal of the Japanese and International Economies, Elsevier, vol. 5(1), pages 41-59, March. [Downloadable!] (restricted)
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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.)

  1. Paul R. Bergin & Giancarlo Corsetti, 2005. "Towards a Theory of Firm Entry and Stabilization Policy," NBER Working Papers 11821, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Ali Dib, 2001. "An Estimated Canadian DSGE Model with Nominal and Real Rigidities," Working Papers 01-26, Bank of Canada. [Downloadable!]
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  3. Ali Dib & Louis Phaneuf, 2001. "An Econometric U.S. Business Cycle Model with Nominal and Real Rigidities," Cahiers de recherche CREFE / CREFE Working Papers 137, CREFE, Université du Québec à Montréal. [Downloadable!]
  4. Kevin X. D. Huang & Zheng Liu & Louis Phaneuf, 2000. "On the Transmission of Monetary Policy Shocks," Cahiers de recherche CREFE / CREFE Working Papers 112, CREFE, Université du Québec à Montréal, revised Sep 2001. [Downloadable!]
  5. Alfred V. Guender & Yu Xie, 2006. "Is There an Exchange Rate Channel in the Forward-Looking Phillips Curve? A Theoretical and Empirical Investigation," Working Papers in Economics 06/16, University of Canterbury, Department of Economics. [Downloadable!]
  6. Kevin X. D. Huang & Zheng Liu, 1998. "Staggered Contracts and Business Cycle Persistence," Cahiers de recherche CREFE / CREFE Working Papers 105, CREFE, Université du Québec à Montréal. [Downloadable!]
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  7. Marianna Riggi, 2007. "New Keynesian models with labor market rigidities: a critical survey," Working Papers 102, Sapienza University of Rome, Department of Public Economics. [Downloadable!]
  8. Günter Coenen & Andrew T. Levin, 2004. "Identifying the influences of nominal and real rigidities in aggregate price-setting behavior," Working Paper Series 418, European Central Bank. [Downloadable!]
    Other versions:
  9. Schabert, Andreas, 2001. "Interest Rate Policy and the Price Puzzle in a Quantitative Business Cycle Model," Economics Series 95, Institute for Advanced Studies. [Downloadable!]
  10. Alfred Guender, 2005. "On discretion versus commitment and the role of the direct exchange rate channel in a forward-looking open economy model," International Economic Journal, Korean International Economic Association, vol. 19(3), pages 355-377, September. [Downloadable!] (restricted)
    Other versions:
  11. Katharine S. Neiss & Evi Pappa, 2005. "Persistence without too much price stickiness: the role of variable factor utilization," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 231-255, January. [Downloadable!] (restricted)
  12. Rochelle M. Edge, 2002. "The Equivalence of Wage and Price Staggering in Monetary Business Cycle Models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(3), pages 559-585, July. [Downloadable!] (restricted)
    Other versions:
  13. George J. Bratsiotis, 2008. "Cross price effects, nominal rigidity and endogenous persistence," Economics Bulletin, Economics Bulletin, vol. 5(29), pages 1-6. [Downloadable!]
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