Pricing to Market in Business Cycle Models
This paper evaluates the performance of leading micro-founded pricing-to-market frictions vis-a-vis a set of robust stylized facts about international prices. In order to make that evaluation meaningful, we embed each friction into a unified IRBC framework and parameterize the models in a uniform way. Our goal is to evaluate the broad-based applicability of these frictions for policy-oriented DSGE modeling by documenting their strengths and weaknesses. We make three points: (i) the mechanisms generating pricing to market are not always neutral to business cycle dynamics of quantities, (ii) some mechanisms require producer markups at least 50% to account for the full range of estimates of the empirical exchange rate pass-through to export prices of 35%-50%, (iii) some frictions crucially depend on a particular driver of uncertainty in the underlying model.
|Date of creation:||17 Mar 2010|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- George Alessandria, 2005. "Consumer search, price dispersion, and international relative price volatility," Working Papers 05-9, Federal Reserve Bank of Philadelphia.
- Morten O. Ravn & Stephanie Schmitt-Grohé & Martín Uribe, 2007.
"Pricing to Habits and the Law of One Price,"
American Economic Review,
American Economic Association, vol. 97(2), pages 232-238, May.
- Ravn, Morten O & Schmitt-Grohé, Stephanie & Uribe, Martín, 2007. "Pricing to Habits and the Law of One Price," CEPR Discussion Papers 6030, C.E.P.R. Discussion Papers.
- Morten Ravn & Stephanie Schmitt-Grohe & Martin Uribe, 2006. "Pricing to Habits and the Law of One Price," NBER Working Papers 12731, National Bureau of Economic Research, Inc.
- Morten O. Ravn & Stephanie Schmitt-Grohe & Martin Uribe, 2006. "Pricing to Habits and the Law of One Price," Economics Working Papers ECO2006/40, European University Institute.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:22513. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.