The Cost of Tractability and the Calvo Pricing Assumption
dc.contributor.author | Yao, Fang | |
dc.date.accessioned | 2017-06-15T23:58:49Z | |
dc.date.available | 2017-06-15T23:58:49Z | |
dc.date.created | 2010-05-21 | |
dc.date.issued | 2009-09-09 | |
dc.identifier.issn | 1860-5664 | |
dc.identifier.uri | http://edoc.hu-berlin.de/18452/4859 | |
dc.description.abstract | This 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.iso | eng | |
dc.publisher | Humboldt-Universität zu Berlin, Wirtschaftswissenschaftliche Fakultät | |
dc.rights.uri | http://rightsstatements.org/vocab/InC/1.0/ | |
dc.subject | Hazard function | eng |
dc.subject | Nominal rigidity | eng |
dc.subject | Real rigidity | eng |
dc.subject | New Keynesian Phillips curve | eng |
dc.subject.ddc | 330 Wirtschaft | |
dc.title | The Cost of Tractability and the Calvo Pricing Assumption | |
dc.type | workingPaper | |
dc.identifier.urn | urn:nbn:de:kobv:11-100110706 | |
dc.identifier.doi | http://dx.doi.org/10.18452/4207 | |
local.edoc.pages | 35 | |
local.edoc.type-name | Diskussionspapier | |
local.edoc.container-type | series | |
local.edoc.container-type-name | Schriftenreihe | |
local.edoc.container-year | 2009 | |
dc.identifier.zdb | 2195055-6 | |
bua.series.name | Sonderforschungsbereich 649: Ökonomisches Risiko | |
bua.series.issuenumber | 2009,42 |