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Inflation and Real Activity with Firm Level Productivity Shocks

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Author Info

  • Robert G. King

    (Boston University)

  • Alexander Wolman

    (Federal Reserve Bank of Richmond)

  • Michael Dotsey

    (Federal Reserve Bank of Philadelphia)

Abstract

The model's flexibility also allows us to parameterize it in ways that generate behavior consistent with some recent studies in the literature, namely Midrigan (2006) and Golosov and Lucas (2008). We can also use simple versions of the model to understand the relationships between price adjustment at the micro level and aggregated statistics such as the hazard rate. In particular, we find that the model is capable of producing flat hazards at the macro level, even though any firm who has just changed its price faces the upward sloping hazard common in state dependent models.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 367.

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Date of creation: 2009
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Handle: RePEc:red:sed009:367

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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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Cited by:
  1. Ahrens, Steffen & Pirschel, Inske & Snower, Dennis J., 2014. "A theory of price adjustment under loss aversion," Economics Working Papers 2014-05, Christian-Albrechts-University of Kiel, Department of Economics.
  2. Michael K. Johnston, 2009. "Real and Nominal Frictions within the Firm: How Lumpy Investment Matters for Price Adjustment," Working Papers 09-36, Bank of Canada.
  3. Steffen Ahrens & Matthias Hartmann, 2014. "State-dependence vs. Time-dependence: An Empirical Multi-Country Investigation of Price Sluggishness," Kiel Working Papers 1907, Kiel Institute for the World Economy.

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