A Unified Framework for Using Micro-Data to Compare Dynamic Time-Dependent Price-Setting Models
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.
Volume (Year): 12 (2012)
Issue (Month): 1 (July)
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