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Can Staggered Price Setting Explain Short-Run Inflation Dynamics?

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  • Esteban Jadresic

    (International Monetary Fund)

Abstract

This paper presents a model of staggered price setting that allows for a flexible distribution of the durations of the prices underlying aggregate price behavior, and estimates it with US data. When tested against an unrestricted version of this model, standard models of sticky prices are rejected. In contrast, a stylized model that assumes a trimodal distribution of price durations with clusters on the first, fourth, and eighth quarter after prices are set, easily passes the same test. In addition, this model is able to replicate the dynamic behavior of inflation and output found in the data.

Suggested Citation

  • Esteban Jadresic, 2000. "Can Staggered Price Setting Explain Short-Run Inflation Dynamics?," Econometric Society World Congress 2000 Contributed Papers 0872, Econometric Society.
    • Handle: RePEc:ecm:wc2000:0872
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    Cited by:

    1. Oya Celasun & R. Gaston Gelos & Alessandro Prati, 2004. "Obstacles to disinflation: what is the role of fiscal expectations? [‘Disinflation with imperfect credibility’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 19(40), pages 442-481.
    2. Oya Celasun & R. Gaston Gelos & Alessandro Prati, 2004. "Would "Cold Turkey" Work in Turkey?," IMF Staff Papers, Palgrave Macmillan, vol. 51(3), pages 493-509, November.
    3. Steinar Holden & John C. Driscoll, 2001. "A Note on Inflation Persistence," NBER Working Papers 8690, National Bureau of Economic Research, Inc.
    4. Robert Amano & Scott Hendry, 2003. "Inflation persistence and costly market share adjustment: a preliminary analysis," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 134-146, Bank for International Settlements.

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