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2009-09-09Buch DOI: 10.18452/4207
The Cost of Tractability and the Calvo Pricing Assumption
dc.contributor.authorYao, Fang
dc.date.accessioned2017-06-15T23:58:49Z
dc.date.available2017-06-15T23:58:49Z
dc.date.created2010-05-21
dc.date.issued2009-09-09
dc.identifier.issn1860-5664
dc.identifier.urihttp://edoc.hu-berlin.de/18452/4859
dc.description.abstractThis paper demonstrates that tractability gained from the Calvo pricing assumption is costly in terms of aggregate dynamics. I derive a generalized New Keynesian Phillips curve featuring a generalized hazard function, non-zero steady state inflation and real rigidity. Analytically, I find that important dynamics in the NKPC are canceled out due to the restrictive Calvo assumption. I also present a general result, showing that, under certain conditions, this generalized Calvo pricing model generates the same aggregate dynamics as the gen- eralized Taylor model with heterogeneous price durations. The richer dynamic structure introduced by the non-constant hazards is also quantitatively important to the inflation dy- namics. Incorporation of real rigidity and trend inflation strengthen this effect even further. With reasonable parameter values, the model accounts for hump-shaped impulse responses of inflation to the monetary shock, and the real effects of monetary shocks are 2-3 times higher than those in the Calvo model.eng
dc.language.isoeng
dc.publisherHumboldt-Universität zu Berlin, Wirtschaftswissenschaftliche Fakultät
dc.rights.urihttp://rightsstatements.org/vocab/InC/1.0/
dc.subjectHazard functioneng
dc.subjectNominal rigidityeng
dc.subjectReal rigidityeng
dc.subjectNew Keynesian Phillips curveeng
dc.subject.ddc330 Wirtschaft
dc.titleThe Cost of Tractability and the Calvo Pricing Assumption
dc.typebook
dc.identifier.urnurn:nbn:de:kobv:11-100110706
dc.identifier.doihttp://dx.doi.org/10.18452/4207
local.edoc.container-titleSonderforschungsbereich 649: Ökonomisches Risiko
local.edoc.pages35
local.edoc.type-nameBuch
local.edoc.container-typeseries
local.edoc.container-type-nameSchriftenreihe
local.edoc.container-volume2009
local.edoc.container-issue42
local.edoc.container-year2009
local.edoc.container-erstkatid2195055-6

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