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Estimation Of Adjustment Costs In A Model Of State Dependent Pricing
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Book Synopsis Estimation of Adjustment Costs in a Model of State-dependent Pricing by :
Download or read book Estimation of Adjustment Costs in a Model of State-dependent Pricing written by and published by . This book was released on with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The Federal Reserve Bank of Kansas City features the full text of the December 2000 working paper entitled "Estimation of Adjustment Costs in a Model of State-dependent Pricing," written by Jonathan Willis. The text is available in PDF format. This paper offers a framework for direct analysis of the underlying price adjustment costs in an industry.
Book Synopsis Estimation of Adjustment Costs in a Model of State-dependent Pricing by : Jonathan L. Willis
Download or read book Estimation of Adjustment Costs in a Model of State-dependent Pricing written by Jonathan L. Willis and published by . This book was released on 2000 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Estimation of Adjustment Cost in a Model of State-dependent Pricing by : Jonathan L. Willis
Download or read book Estimation of Adjustment Cost in a Model of State-dependent Pricing written by Jonathan L. Willis and published by . This book was released on 2000 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Information-constrained State-dependent Pricing by : Michael Woodford
Download or read book Information-constrained State-dependent Pricing written by Michael Woodford and published by . This book was released on 2008 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: I present a generalization of the standard (full-information) model of state-dependent pricing in which decisions about when to review a firm's existing price must be made on the basis of imprecise awareness of current market conditions. The imperfect information is endogenized using a variant of the theory of "rational inattention" proposed by Sims (1998, 2003, 2006). This results in a one-parameter family of models, indexed by the cost of information, which nests both the standard state-dependent pricing model and the Calvo model of price adjustment as limiting cases (corresponding to a zero information cost and an unboundedly large information cost respectively). For intermediate levels of the information cost, the model is equivalent to a "generalized Ss model" with a continuous "adjustment hazard" of the kind proposed by Caballero and Engel (1993a, 1993b), but provides an economic motivation for the hazard function and very specific predictions about its form. For high enough levels of the information cost, the Calvo model of price-setting is found to be a reasonable approximation to the exact equilibrium dynamics, except in the case of (infrequent) large shocks. When the model is calibrated to match the frequency and size distribution of price changes observed in microeconomic data sets, prices are found to be much less flexible than in a full-information state-dependent pricing model, and only about 20 percent more flexible than under a Calvo model with the same average frequency of price adjustment.
Book Synopsis Information-constrained State-dependent Pricing by : Michael Woodford
Download or read book Information-constrained State-dependent Pricing written by Michael Woodford and published by . This book was released on 2008 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: I present a generalization of the standard (full-information) model of state- dependent pricing in which decisions about when to review a firm's existing price must be made on the basis of imprecise awareness of current market conditions. The imperfect information is endogenized using a variant of the theory of "rational inattention" proposed by Sims (1998, 2003, 2006). This results in a one-parameter family of models, indexed by the cost of information, which nests both the standard state-dependent pricing model and the Calvo model of price adjustment as limiting cases (corresponding to a zero information cost and an unboundedly large information cost respectively). For intermediate levels of the information cost, the model is equivalent to a "generalized Ss model" with a continuous \adjustment hazard" of the kind proposed by Caballero and Engel (1993a, 1993b), but provides an economic motivation for the hazard function and very specific predictions about its form. For high enough levels of the information cost, the Calvo model of price-setting is found to be a reasonable approximation to the exact equilibrium dynamics, except in the case of (infrequent) large shocks. When the model is calibrated to match the frequency and size distribution of price changes observed in microeconomic data sets, prices are found to be much less flexible than in a full-information state-dependent pricing model, and only about 20 percent more flexible than under a Calvo model with the same average frequency of price adjustment.
Book Synopsis State-dependent Pricing Under Infrequent Information by : Marco Antonio Bonomo
Download or read book State-dependent Pricing Under Infrequent Information written by Marco Antonio Bonomo and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis State Dependent Pricing and Business Cycle Asymmetries by : Michael B. Devereux
Download or read book State Dependent Pricing and Business Cycle Asymmetries written by Michael B. Devereux and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present a tractable, dynamic general equilibrium model of state-dependent pricing and study the response of output and prices to monetary policy shocks. We find important nonlinearities in these responses. For empirically relevant shocks, this generates substantially different predictions from time-dependent pricing. We also find a distinct asymmetry with state-dependent pricing: Prices respond more to positive shocks than they do to negative shocks. This is due to a strategic linkage between firms in the incentive for price adjustment. Our state-dependent model can account for business cycle asymmetries in output of the magnitude found in empirical studies.
Book Synopsis Price Adjustments in a General Model of State-dependent Pricing by : James Costain
Download or read book Price Adjustments in a General Model of State-dependent Pricing written by James Costain and published by . This book was released on 2008 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Frequency of Price Adjustment and Pass-Through by : Gita Gopinath
Download or read book Frequency of Price Adjustment and Pass-Through written by Gita Gopinath and published by . This book was released on 2010 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: A common finding across empirical studies of price adjustment is that there is large heterogeneity in the frequency of price adjustment. However, there is little evidence of how distant prices are from the desired flexible price. Without this evidence, it is difficult to discern what the frequency measure implies for the transmission of shocks or to understand why some firms adjust more frequently than others. We exploit the open economy environment, which provides a well-identified and sizeable cost shock namely the exchange rate shock to shed light on these questions. First, we empirically document that high frequency adjusters have a long-run pass-through that is at least twice as high as low frequency adjusters in the data. Next, we show theoretically that long-run pass-through is determined by the same primitives that shape the curvature of the profit function and, hence, also affect frequency. In an environment with variable mark-ups or variable marginal costs, theory predicts a positive relation between frequency and pass-through, as documented in the data. Consequently, estimates of long-run pass-through shed light on the determinants of the duration of prices. The standard workhorse model with constant elasticity of demand and Calvo or state dependent pricing generates long-run pass-through that is uncorrelated with frequency, contrary to the data. Lastly, we calibrate a dynamic menu-cost model and show that variable mark-ups chosen to match the variation in pass-through in the data can generate substantial variation in price duration, equivalent to one third of the observed variation in the data.
Book Synopsis Estimating Intertemporal Quadratic Adjustment Cost Models with Integrated Series by : Juan José Dolado
Download or read book Estimating Intertemporal Quadratic Adjustment Cost Models with Integrated Series written by Juan José Dolado and published by . This book was released on 1991 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Price Adjustments in a General Models of State-dependent Pricing by : James Costain
Download or read book Price Adjustments in a General Models of State-dependent Pricing written by James Costain and published by . This book was released on 2008 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A state-dependent model of intermediate goods pricing by : Brent Neiman
Download or read book A state-dependent model of intermediate goods pricing written by Brent Neiman and published by . This book was released on 2010 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent analyses of transaction-level datasets have generated new stylized facts on price setting and greatly influenced the empirical open- and closed-economy macroeconomics literatures. This work has uncovered marked heterogeneity in price stickiness, demonstrated that even non-zero price changes do not fully "pass through" exchange rate shocks, and offered evidence of synchronization in the timing of price changes. Further, intrafirm prices have been shown to differ from arm's length prices in each of these characteristics. This paper develops a state-dependent model of intermediate goods pricing, which allows for arm's length and intrafirm transactions, and is capable of generating these empirical pricing patterns.
Book Synopsis Why So Sluggish? by : Angelo Polydoro
Download or read book Why So Sluggish? written by Angelo Polydoro and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this article, we study how the economic environment for firms in the service sector affects their price adjustments by using a novel dataset from the Services Survey of the Brazilian Institute of Economics from the Getulio Vargas Foundation (FGV). The set of variables from the survey includes the firms' assessments of business conditions, demand, revenue, employment and capacity utilization, as well as the factors that limit their business development, such as a lack of space, an underqualified workforce and financing costs, etc. We show that prices in the service sector are more sluggish because the response of firms to changes in their environment is heavily asymmetric. For example, when they foresee worse demand conditions, they are 3% less likely to increase prices, 2% more likely to keep prices constant and 0.6% more likely to lower prices. In addition to studying price setting determinants in the service sector, we show that behavior is consistent with both state and time-dependent price setting models. By estimating a state-dependent pricing model augmented by variables that indicate the last time a firm decided to raise prices, we find that these variables are significant and their marginal impact on price adjustment probability is positive.
Book Synopsis Nominal Rigidities in a Mail Order Company: Estimation of the Probability of Price Adjustment by :
Download or read book Nominal Rigidities in a Mail Order Company: Estimation of the Probability of Price Adjustment written by and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Nominal price rigidities are analyzed from two different perspectives. From a qualitative point of view - as Kashyap (1995) - we look for coherent signs which confirm the presence of fixed costs of adjustment, and therefore the validity of state-dependent pricing rules. Our data concern a mail order Italian company and confirm that individual prices do not mimic the aggregate price index, as it was already claimed by Kashyap (1995) and Tsiddon (1993) for US and Israeli data. Second, we estimate by ordered probit models the probability to have nominal price adjustments (increase, rigidity or decrease) as a function of last period real price and rivals price level. Price point strategies are also investigated. We observe a common performance for all brands prices which supports a (S, s) rule hypothesis.
Download or read book Dynamic Economics written by Jerome Adda and published by MIT Press. This book was released on 2003-08-29 with total page 304 pages. Available in PDF, EPUB and Kindle. Book excerpt: An integrated approach to the empirical application of dynamic optimization programming models, for students and researchers. This book is an effective, concise text for students and researchers that combines the tools of dynamic programming with numerical techniques and simulation-based econometric methods. Doing so, it bridges the traditional gap between theoretical and empirical research and offers an integrated framework for studying applied problems in macroeconomics and microeconomics. In part I the authors first review the formal theory of dynamic optimization; they then present the numerical tools and econometric techniques necessary to evaluate the theoretical models. In language accessible to a reader with a limited background in econometrics, they explain most of the methods used in applied dynamic research today, from the estimation of probability in a coin flip to a complicated nonlinear stochastic structural model. These econometric techniques provide the final link between the dynamic programming problem and data. Part II is devoted to the application of dynamic programming to specific areas of applied economics, including the study of business cycles, consumption, and investment behavior. In each instance the authors present the specific optimization problem as a dynamic programming problem, characterize the optimal policy functions, estimate the parameters, and use models for policy evaluation. The original contribution of Dynamic Economics: Quantitative Methods and Applications lies in the integrated approach to the empirical application of dynamic optimization programming models. This integration shows that empirical applications actually complement the underlying theory of optimization, while dynamic programming problems provide needed structure for estimation and policy evaluation.
Book Synopsis Interest and Prices by : Michael Woodford
Download or read book Interest and Prices written by Michael Woodford and published by Princeton University Press. This book was released on 2011-12-12 with total page 805 pages. Available in PDF, EPUB and Kindle. Book excerpt: With the collapse of the Bretton Woods system, any pretense of a connection of the world's currencies to any real commodity has been abandoned. Yet since the 1980s, most central banks have abandoned money-growth targets as practical guidelines for monetary policy as well. How then can pure "fiat" currencies be managed so as to create confidence in the stability of national units of account? Interest and Prices seeks to provide theoretical foundations for a rule-based approach to monetary policy suitable for a world of instant communications and ever more efficient financial markets. In such a world, effective monetary policy requires that central banks construct a conscious and articulate account of what they are doing. Michael Woodford reexamines the foundations of monetary economics, and shows how interest-rate policy can be used to achieve an inflation target in the absence of either commodity backing or control of a monetary aggregate. The book further shows how the tools of modern macroeconomic theory can be used to design an optimal inflation-targeting regime--one that balances stabilization goals with the pursuit of price stability in a way that is grounded in an explicit welfare analysis, and that takes account of the "New Classical" critique of traditional policy evaluation exercises. It thus argues that rule-based policymaking need not mean adherence to a rigid framework unrelated to stabilization objectives for the sake of credibility, while at the same time showing the advantages of rule-based over purely discretionary policymaking.
Book Synopsis Entry Costs and the Macroeconomy by : Germán Gutiérrez
Download or read book Entry Costs and the Macroeconomy written by Germán Gutiérrez and published by International Monetary Fund. This book was released on 2019-11-01 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: We combine a structural model with cross-sectional micro data to identify the causes and consequences of rising concentration in the US economy. Using asset prices and industry data, we estimate realized and anticipated shocks that drive entry and concentration. We validate our approach by showing that the model-implied entry shocks correlate with independently constructed measures of entry regulations and M&As. We conclude that entry costs have risen in the U.S. over the past 20 years and have depressed capital and consumption by about seven percent.
