This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Firm-Specific Production Factors in a DSGE Model with Taylor Price Setting

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
de Walque, Gregory
Smets, Frank
Wouters, Rafael

Additional information is available for the following registered author(s):

Abstract

Using Bayesian likelihood methods, this paper estimates a dynamic stochastic general equilibrium model with Taylor contracts and firm-specific factors in the goods market on euro-area data. The paper shows how the introduction of firmspecific factors improves the empirical fit of the model and reduces the estimated contract length to a duration of four quarters, which is more consistent with the empirical evidence on average price durations in the euro area. However, in order to obtain this result, the estimated real rigidity is very large, either in the form of a very large constant elasticity of substitution between goods or in the form of an endogenous elasticity of substitution that is very sensitive to the relative price. Finally, the paper also investigates the implications of these estimates for the distribution of prices and quantities across the various goods sectors.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. 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://mpra.ub.uni-muenchen.de/810/
File Format:
File Function:
Download Restriction: no

Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 810.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 30 Jun 2006
Date of revision:
Publication status: Published in International Journal of Central Banking Number 3.Volume 2(2006): pp. 107-154
Handle: RePEc:pra:mprapa:810

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Ekkehart Schlicht).

Related research
Keywords:

Other versions of this item:

Find related papers by JEL classification:
G00 - Financial Economics - - General - - - General
G0 - Financial Economics - - General

This paper has been announced in the following NEP Reports:

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.:
  1. Hasan Bakhshi & Pablo Burriel-Llombart & Hashmat Khan & Barbara Rudolf, . "Endogenous price stickiness, trend inflation, and the New Keynesian Phillips curve," Bank of England working papers 191, Bank of England. [Downloadable!]
    Other versions:
  2. Ignazio Angelloni & Luc Aucremanne & Michael Ehrmann & Jordi Galí & Andrew Levin & Frank Smets, 2005. "New Evidence on Inflation Persistence and Price Stickiness in the Euro Area: Implications for Macro Modelling," Economics Working Papers 910, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  3. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
    Other versions:
  4. Stephen Murchison & Andrew Rennison & Zhenhua Zhu, 2004. "A Structural Small Open-Economy Model for Canada," Working Papers 04-4, Bank of Canada. [Downloadable!]
  5. Filippo Altissimo & Michael Ehrmann & Frank Smets, 2006. "Inflation persistence and price-setting behaviour in the euro area – a summary of the IPN evidence," Occasional Paper Series 46, European Central Bank. [Downloadable!]
  6. Aubhik Khan & Robert King & Alexander L. Wolman, 2002. "Optimal monetary policy," Working Papers 02-19, Federal Reserve Bank of Philadelphia. [Downloadable!]
    Other versions:
  7. Engin Kara & Huw Dixon, 2005. "Persistence and Nominal Inertia in a Generalized Taylor Economy: How Longer Contracts Dominate Shorter Contracts," Computing in Economics and Finance 2005 87, Society for Computational Economics. [Downloadable!]
    Other versions:
  8. Martin Eichenbaum & Jonas D.M. Fisher, 2004. "Evaluating the Calvo Model of Sticky Prices," NBER Working Papers 10617, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February. [Downloadable!] (restricted)
  10. Jean-Pierre DANTHINE & John B. DONALDSON, 2002. "A Note on NNS Models: Introducing Physical Capital; Avoiding Rationing," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 02.04, Université de Lausanne, Faculté des HEC, DEEP. [Downloadable!]
    Other versions:
  11. Yun, Tack, 1996. "Nominal price rigidity, money supply endogeneity, and business cycles," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 345-370, April. [Downloadable!] (restricted)
  12. Fagan, Gabriel & Henry, Jerome & Mestre, Ricardo, 2005. "An area-wide model for the euro area," Economic Modelling, Elsevier, vol. 22(1), pages 39-59, January. [Downloadable!] (restricted)
  13. Sbordone, Argia M., 2002. "Prices and unit labor costs: a new test of price stickiness," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 265-292, March. [Downloadable!] (restricted)
    Other versions:
  14. Raf Wouters & Frank Smets, 2005. "Comparing shocks and frictions in US and euro area business cycles: a Bayesian DSGE Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 161-183. [Downloadable!]
    Other versions:
  15. de Walque, G. & Smets, F. & Wouters, R., 2005. "Price setting in General Equilibrium: Alternative Specifications," Computing in Economics and Finance 2005 370, Society for Computational Economics.
  16. Dixon, Huw & Kara, Engin, 2006. "How to Compare Taylor and Calvo Contracts: A Comment on Michael Kiley," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(4), pages 1119-1126, June. [Downloadable!] (restricted)
    Other versions:
  17. Julien Matheron, 2006. "Firm-Specific Labor and Firm-Specific Capital: Implications for the Euro-Data New Phillips Curve," International Journal of Central Banking, International Journal of Central Banking, vol. 2(4), December. [Downloadable!]
  18. Michael Dotsey & Robert G. King & Alexander L. Wolman, 1999. "State-Dependent Pricing And The General Equilibrium Dynamics Of Money And Output," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 655-690, May. [Downloadable!] (restricted)
  19. Whelan, Karl, 2004. "Staggered Price Contracts and Inflation Persistence: Some General Results," Research Technical Papers 8/RT/04, Central Bank & Financial Services Authority of Ireland (CBFSAI). [Downloadable!]
    Other versions:
  20. Gali, Jordi & Gertler, Mark, 1999. "Inflation dynamics: A structural econometric analysis," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 195-222, October. [Downloadable!] (restricted)
    Other versions:
  21. Lutz Weinke & Tommy Sveen, 2003. "Inflation and Output Dynamics with Firm-owned Capital," Economics Working Papers 702, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  22. Kimball, Miles S, 1995. "The Quantitative Analytics of the Basic Neomonetarist Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1241-77, November. [Downloadable!] (restricted)
    Other versions:
  23. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, 09. [Downloadable!] (restricted)
    Other versions:
  24. Gali, Jordi & Gertler, Mark & Lopez-Salido, J. David, 2001. "European inflation dynamics," European Economic Review, Elsevier, vol. 45(7), pages 1237-1270. [Downloadable!] (restricted)
    Other versions:
  25. Daniel Levy & Andrew Young, 2004. ""The Real Thing:" Nominal Price Rigidity of the Nickel Coke, 1886-1959," Macroeconomics 0402013, EconWPA. [Downloadable!]
    Other versions:
  26. Tommy Sveen & Lutz Weinke, 2004. "New Perspectives on Capital and Sticky Prices," Working Paper 2004/03, Norges Bank. [Downloadable!]
  27. Coenen, Gunter & Levin, Andrew T. & Christoffel, Kai, 2007. "Identifying the influences of nominal and real rigidities in aggregate price-setting behavior," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2439-2466, November. [Downloadable!] (restricted)
    Other versions:
  28. Altig, David & Christiano, Lawrence & Eichenbaum, Martin & Lindé, Jesper, 2004. "Firm-Specific Capital, Nominal Rigidities and the Business Cycle," Working Paper Series 176, Sveriges Riksbank (Central Bank of Sweden). [Downloadable!]
    Other versions:
  29. Mónica Dias & Daniel Dias & Pedro D. Neves, 2004. "Stylised features of price setting behaviour in Portugal: 1992 - 2001," Working Paper Series 332, European Central Bank. [Downloadable!]
  30. Gabriel Fagan & Jérôme Henry & Ricardo Mestre, 2001. "An area-wide model (AWM) for the euro area," Working Paper Series 42, European Central Bank. [Downloadable!]
  31. Luc Aucremanne & Emmanuel Dhyne, 2004. "How frequently do prices change? Evidence based on the micro data underlying the Belgian CPI," Research series 200404-1, National Bank of Belgium. [Downloadable!]
  32. Luc Aucremanne & Emmanuel Dhyne, 2004. "How frequently do prices change? Evidence based on the micro data underlying the Belgian CPI," Working Paper Series 331, European Central Bank. [Downloadable!]
  33. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September. [Downloadable!] (restricted)
  34. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 1-45, February.
    Other versions:
Full 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.)

  1. Maarten Dossche & Freddy Heylen & Dirk Van den Poel, 2006. "The kinked demand curve and price rigidity : evidence from scanner data," Research series 200610-11, National Bank of Belgium. [Downloadable!]
    Other versions:
  2. Fève, P. & Matheron, J. & Sahuc, J-G., 2009. "Disinflation and unemployment in the euro area : A SVAR-based analysis," Documents de Travail 247, Banque de France. [Downloadable!]
  3. Fève, Patrick & Matheron, Julien & Sahuc, Jean-Guillaume, 2008. "Inflation Target Shocks and Monetary Policy Inertia in the Euro Area," IDEI Working Papers 515, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? All RePEc services are meant to be be free forever, as they are all run by volunteers.

This page was last updated on 2009-11-27.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.