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Generalized Taylor and Generalized Calvo price and wage-setting: micro evidence with macro implications

Listed author(s):
  • Dixon, H.
  • Le Bihan, H.

The Generalized Calvo and the Generalized Taylor model of price and wage-setting are, unlike the standard Calvo and Taylor counterparts, exactly consistent with the distribution of durations observed in the data. Using price and wage micro-data from a major euro-area economy (France), we develop calibrated versions of these models. We assess the consequences for monetary policy transmission by embedding these calibrated models in a standard DSGE model. The Generalized Taylor model is found to help rationalizing the hump-shaped response of inflation, without resorting to the counterfactual assumption of systematic wage and price indexation.

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File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/working-paper_324_2011.pdf
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Paper provided by Banque de France in its series Working papers with number 324.

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Length: 38 pages
Date of creation: 2011
Handle: RePEc:bfr:banfra:324
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Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS

Web page: http://www.banque-france.fr/

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