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Monetary neutrality in one specific class of DGE model with staggered prices

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  • Kirill Sosunov

Abstract

In this paper I show that monetary neutrality proposition holds for one specific parameterization of a dynamic general equilibrium model of monopolistic competition even if nominal rigidity in a form of staggered price setting or partial adjustment price-setting mechanism is present in a model. This parameterization is a result of a zero profit condition for intermediate goods producers and it requires that degree of increasing returns in intermediate goods production is equal to price- marginal costs markup.

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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0112003.

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Length: 10 pages
Date of creation: 10 Dec 2001
Date of revision:
Handle: RePEc:wpa:wuwpma:0112003

Note: Type of Document - MS Word; prepared on IBM PC ; to print on HP/; pages: 10
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Web page: http://128.118.178.162

Related research

Keywords: macroeconomics business cycles staggered prices;

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References

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  1. Farmer, Roger E.A., 2000. "Two New Keynesian Theories Of Sticky Prices," Macroeconomic Dynamics, Cambridge University Press, vol. 4(01), pages 74-107, March.
  2. repec:cup:macdyn:v:4:y:2000:i:1:p:74-107 is not listed on IDEAS
  3. Laurence Ball & David Romer, 1987. "Real Rigidities and the Non-Neutrality of Money," NBER Working Papers 2476, National Bureau of Economic Research, Inc.
  4. Jordi Galí, 1993. "Monopolistic competition, business cycles and the composition of aggregate demand," Economics Working Papers 45, Department of Economics and Business, Universitat Pompeu Fabra.
  5. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1998. "Sticky price models of the business cycle: can the contract multiplier solve the persistence problem?," Staff Report 217, Federal Reserve Bank of Minneapolis.
  6. Kevin Huang & Z. Liu, . "Staggered contracts and business cycle persistence," Working Papers 2000-08, Utah State University, Department of Economics.
  7. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-66, September.
  8. Michael T. Kiley, 1997. "Staggered price setting and real rigidities," Finance and Economics Discussion Series 1997-46, Board of Governors of the Federal Reserve System (U.S.).
  9. repec:nbr:nberre:0126 is not listed on IDEAS
  10. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  11. Roger E.A. Farmer, 1990. "Sticky Prices," UCLA Economics Working Papers 588, UCLA Department of Economics.
  12. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
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