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Aggregation and Optimization with State-Dependent Pricing: A Comment

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  • Vladislav Damjanovic

    ()

  • Charles Nolan

    ()

Abstract

A key argument in Caplin and Leahy (1997) states that the correlation between monetary shocks and output is falling in the variance of the money supply. We demonstrate that this conclusion depends on solving for the correlation in the non-stationary state of the model. In the stationary state, that correlation is initially rising.

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File URL: http://www.st-andrews.ac.uk/economics/CDMA/papers/wp0506.pdf
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Bibliographic Info

Paper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Working Paper Series with number 200506.

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Date of creation: 15 Jun 2005
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Handle: RePEc:san:cdmawp:0506

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Keywords: Ss pricing; money-output correlations; macroeconomic dynamics.;

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  1. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-34, June.
  2. Caplin, A. & Leahy, J., 1992. "Aggregation and Optimization with State-Dependent Pricing," Discussion Papers 1992_15, Columbia University, Department of Economics.
  3. Vladislav Damjanovic & Charles Nolan, 2005. "Aggregate Dynamics with Heterogeneous Agents and State-Dependent Pricing," CDMA Working Paper Series 200505, Centre for Dynamic Macroeconomic Analysis.
  4. Caplin, A. & Leahy, J., 1989. "State-Dependent Pricing And The Dynamics Of Money And Output," Discussion Papers 1989_32, Columbia University, Department of Economics.
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Cited by:
  1. Damjanovic, Vladislav & Nolan, Charles, 2012. "S,s pricing in a dynamic equilibrium model with heterogeneous sectors," Journal of Economic Dynamics and Control, Elsevier, vol. 36(4), pages 550-567.
  2. Zakaria Babutsidze, 2012. "Asymmetric (S,s) Pricing: Implications for Monetary Policy," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 177-204.
  3. Vladislav Damjanovic & Charles Nolan, 2007. "S,s Pricing in a General Equilibrium Model with Heterogeneous Sectors," CDMA Working Paper Series 200709, Centre for Dynamic Macroeconomic Analysis.
  4. Andrew Caplin & John Leahy, 2010. "Economic Theory and the World of Practice: A Celebration of the ( S, s ) Model," Journal of Economic Perspectives, American Economic Association, vol. 24(1), pages 183-202, Winter.

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