Staggered Price Setting and Endogenous Persistence / Paul R. Bergin, Robert C. Feenstra.

Format:

Book

Author/Creator:

Bergin, Paul R.

Contributor:

National Bureau of Economic Research.

Feenstra, Robert C.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6492.

NBER working paper series no. w6492

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1998.

Summary:

This paper generates persistent effects of a monetary disturbance in the context of staggered price-setters. Previous research has been restricted by the CES functional form to price-setting rules that are constant markups over marginal costs. The present paper considers a translog form for preferences and an input-output structure for production in the context of a dynamic general equilibrium model of monopolistically competitive staggered price-setters. We derive a price-setting rule that is a function of marginal cost and also competitors' prices. This rule better captures the interaction of price-setters envisioned in Taylor (1980) and Blanchard (1983) in their early work on staggered contracts. The model is able to generate reasonable persistence, and also confirms the conjecture of Taylor and Blanchard that increasing the number of contracting groups increases the degree of persistence.

Notes:

Print version record

April 1998.