Micro-based estimates of heterogeneous pricing rules: the united states vs. The euro area
This paper presents US and euro area estimates for a fully heterogeneous model, in which there is a continuum of f rms setting prices with a constant probability of adjustment, which may differ from f rm to f rm. The estimated model accurately matches the empirical distribution function of individual price durations for the US and the euro area. Incorporating these micro based pricing rules into a DSGE model, we f nd that nominal shocks have a greater real impact in the fully heterogeneous economy than in the standard Calvo model. We also f nd that nominal and real shocks bring about a reallocation of resources among sectors. Monetary policy is found to have a greater real impact in the euro area than in the United States.
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