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Nominal Rigidities in an Estimated Two Country

  • Riccardo Cristadoro

    (Bank of Italy)

  • Andrea Gerali


    (Bank of Italy)

  • Stefano Neri

    (Bank of Italy)

  • Massimiliano Pisani

    (Bank of Italy)

This paper uses bayesian techniques to estimate a small-scale two country model based on the Euro Area and the U.S. data. The model, based on the New Open Economy Macroeconomics framework, is microfounded and characterized by nominal price rigidities, a nontradable sector, home bias in consumption and incomplete financial markets at international level. Two versions of the model are estimated: in one the international law of one price for tradable goods holds, in the other there is international price discrimination. Several results emerge. First, nominal rigidities are quite symmetric across countries. Second, Euro Area and U.S. monetary policies are different; in particular, U.S policy makers seems to be relatively more aggressive against inflation. Third, international spillovers are low

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Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 162.

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Date of creation: 04 Jul 2006
Date of revision:
Handle: RePEc:sce:scecfa:162
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