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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. 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.).
  2. repec:nbr:nberre:0126 is not listed on IDEAS
  3. Farmer, R.E.A., 1999. "Two New Keynesian Theories of Sticky Prices," Economics Working Papers eco99/33, European University Institute.
  4. 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.
  5. repec:cup:macdyn:v:4:y:2000:i:1:p:74-107 is not listed on IDEAS
  6. Kevin X. D. Huang & Zheng Liu, 1998. "Staggered contracts and business cycle persistence," Discussion Paper / Institute for Empirical Macroeconomics 127, Federal Reserve Bank of Minneapolis.
  7. Farmer, Roger E A, 1991. "Sticky Prices," Economic Journal, Royal Economic Society, vol. 101(409), pages 1369-79, November.
  8. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  9. Ball, Laurence & Romer, David, 1990. "Real Rigidities and the Non-neutrality of Money," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 183-203, April.
  10. Gali, J., 1991. "Monopolistic Competition, Business Cycles and the Composition of Aggregate Demand," Papers 92-03, Columbia - Graduate School of Business.
  11. 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.
  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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