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A Unified Framework for Using Micro-Data to Compare Dynamic Time-Dependent Price-Setting Models

  • Dixon Huw

    ()

    (Cardiff Business School)

This paper develops a statistical framework of steady-state identities which enable us to match the distributions of durations found in the micro-data to generalized Taylor and Calvo models of time-dependent pricing. We illustrate the approach with the UK micro CPI data for 1996-2009, and employ the pricing models in a simple macromodel. We find that the Generalized Taylor Economy generates a hump shaped inflation impulse response function, whilst the Generalized Calvo does not.

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Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 12 (2012)
Issue (Month): 1 (July)
Pages: 1-45

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Handle: RePEc:bpj:bejmac:v:12:y:2012:i:1:n:22
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  1. Uhlig, Harald, 1999. "What are the Effects of Monetary Policy on Output? Results from an Agnostic Identification Procedure," CEPR Discussion Papers 2137, C.E.P.R. Discussion Papers.
  2. Eyal Baharad & Benjamin Eden, 2004. "Price Rigidity and Price Dispersion: Evidence from Micro Data," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(3), pages 613641-6136, July.
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  10. Huw Dixon & Engin Kara, 2005. "How to Compare Taylor and Calvo Contracts: a comment on Michael Kiley," CDMA Working Paper Series 200504, Centre for Dynamic Macroeconomic Analysis.
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