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Author : James Costain
Publisher :
ISBN 13 :
Total Pages : 44 pages
Book Rating : 4.:/5 (733 download)
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:
Author : James Costain
Publisher :
ISBN 13 :
Total Pages : 44 pages
Book Rating : 4.:/5 (125 download)
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:
Author : James Costain
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (138 download)
Download or read book Dynamics of the Price in a General Model of State-dependent Pricing written by James Costain and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the effects of monetary shocks in a DSGE model that allows for a general form of smoothly state-dependent pricing by firms. As in Dotsey, King, and Wolman (1999) and Caballero and Engel (2007), our setup is based on one fundamental property: firms are more likely to adjust their prices when doing so is more valuable. The exogenous timing (Calvo 1983) and fixed menu cost (Golosov and Lucas 2007) models are nested as limiting cases of our setup. Our model is calibrated to match the steady-state distribution of price adjustments in microdata; realism calls for firm-specific shocks. Computing a dynamic general equilibrium requires us to calculate how the distribution of prices and productivities evolves over time. We solve the model using the method of Reiter (2008), which is well-suited to this type of problem because it combines a fully nonlinear treatment of firm-level state variables with a linearization of the aggregate dynamics. We compute impulse responses to iid and autocorrelated money growth shocks, and decompose the inflation impact into 'intensive margin', 'extensive margin' and 'selection' components. Under our most successful calibration, increased money growth causes a persistent rise in inflation and output. The real effects are substantially larger if money growth is autocorrelated. In contrast, if we instead impose a fixed menu cost specification, money growth shocks cause a sharp spike in inflation (via the selection component) so that the real effects are small and short-lived, especially if money growth is iid. [Resumen de autor]
Author : Michael Woodford
Publisher :
ISBN 13 :
Total Pages : 55 pages
Book Rating : 4.:/5 (611 download)
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.
Author : Michael Woodford
Publisher :
ISBN 13 :
Total Pages : 55 pages
Book Rating : 4.:/5 (12 download)
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.
Author : Jonathan L. Willis
Publisher :
ISBN 13 :
Total Pages : 38 pages
Book Rating : 4.:/5 (248 download)
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:
Author : Michael B. Devereux
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)
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.
Author : Michael Dotsey
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)
Download or read book Implications of State-Dependent Pricing for Dynamic Macroeconomic Models written by Michael Dotsey and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: State-dependent pricing (SDP) models treat the timing of price changes as a profit-maximizing choice, symmetrically with other decisions of firms. Using quantitative general equilibrium models that incorporate a "generalized (S,s) approach," the authors investigate the implications of SDP for topics in two major areas of macroeconomic research: the early 1990s SDP literature and more recent work on persistence mechanisms. First, they show that state-dependent pricing leads to unusual macroeconomic dynamics, which occur because of the timing of price adjustments chosen by firms as in the earlier literature. In particular, they display an example in which output responses peak at about a year, while inflation responses peak at about two years after the shock. Second, the authors examine whether the persistence-enhancing effects of two New Keynesian model features, namely, specific factor markets and variable elasticity demand curves, depend importantly on whether pricing is state dependent. In an SDP setting, they provide examples in which specific factor markets perversely work to lower persistence, while variable elasticity demand raises it.
Author : Jonathan L. Willis
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (133 download)
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:
Author : James Costain
Publisher :
ISBN 13 :
Total Pages : 47 pages
Book Rating : 4.:/5 (434 download)
Download or read book Dynamics of the Price Distribution in a General Model of State-dependent Pricing written by James Costain and published by . This book was released on 2008 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Marco Antonio Bonomo
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (863 download)
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:
Author : Brent Neiman
Publisher :
ISBN 13 :
Total Pages : 36 pages
Book Rating : 4.:/5 (695 download)
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.
Author : Wai-Yip Alex Ho
Publisher : Open Dissertation Press
ISBN 13 : 9781374726345
Total Pages : 126 pages
Book Rating : 4.7/5 (263 download)
Download or read book ESSAYS ON STATE DEPENDENT PRIC written by Wai-Yip Alex Ho and published by Open Dissertation Press. This book was released on 2017-01-27 with total page 126 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation, "Essays on State Dependent Pricing Models" by Wai-yip, Alex, Ho, 何偉業, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: Abstract of thesis entitled Essays on State Dependent Pricing Models submitted by Wai-Yip Alex HO for the degree of Master of Philosophy in Economics at The University of Hong Kong in August 2004 Abstract A dynamic general equilibrium model is developed to study the properties of state dependent pricing. In the rst section, we analyze the long-run properties of the model and nd that the eect of strategic complementarity in pricing decision between rms plays an important role in the model. When trend ination rate exceeds some critical level, such strategic complementarity results in existence of multiple equilibria in the model (2 equilibria). As trend ination increases, the dierence between the two equilibria gets wider. We then investigate the number of possible equilibrium by looking at the best response function of rms over certain values of trend ination rate. We nd that there exist one more unstable equilibrium. We nally access the long run dierence between the state dependent pricing model and the Calvo-pricing model and nd that the eect of trend ination on the model with state dependent pricing is much smaller than with Calvo-pricing. Under the same model specication and over the range of 1% to 6% trend ination rate, we nd that the eect of an increase in trend ination with state dependent pricing is smaller than with Calvo-pricing. In the next section, we explore the properties of the impulse responses of the state-dependent pricing model and compare it with a time-dependent pricing model. State-dependent pricing models show asymmetries in responding to dierent signs of a temporary money supply growth rate shock. However, real eects of such monetary shocks are not increasing proportionally to the size of the shock. Interestingly, we nd that if the size of the shock exceeds some critical level, the impulse response of the model to a positive shock converges to the impulse response to a negative shock. DOI: 10.5353/th_b3105994 Subjects: Pricing - Mathematical models
Author : Peter J. Klenow
Publisher : Bank of Canada
ISBN 13 :
Total Pages : 40 pages
Book Rating : 4.:/5 (253 download)
Download or read book State-dependent Or Time-dependent Pricing written by Peter J. Klenow and published by Bank of Canada. This book was released on 2005 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inflation equals the product of two terms: an extensive margin (the fraction of items with price changes) and an intensive margin (the average size of those price changes). The variance of inflation over time can be decomposed into contributions from each margin. The extensive margin figures importantly in many state-dependent pricing models, whereas the intensive margin is the sole source of inflation changes in staggered time-dependent pricing models. We use micro data collected by the U.S. Bureau of Labor Statistics to decompose the variance of consumer price inflation from 1988 through 2003. We find that around 95% of the variance of monthly inflation stems from fluctuations in the average size of price changes, i.e., the intensive margin. When we calibrate a prominent state-dependent pricing model to match this empirical variance decomposition, the model's shock responses are very close to those in time-dependent pricing models.
Author : Carl E. Walsh
Publisher : MIT Press
ISBN 13 : 0262303736
Total Pages : 639 pages
Book Rating : 4.2/5 (623 download)
Download or read book Monetary Theory and Policy, third edition written by Carl E. Walsh and published by MIT Press. This book was released on 2010-02-12 with total page 639 pages. Available in PDF, EPUB and Kindle. Book excerpt: A new edition of the leading text in monetary economics, a comprehensive treatment revised and enhanced with new material reflecting recent advances in the field. This text presents a comprehensive treatment of the most important topics in monetary economics, focusing on the primary models monetary economists have employed to address topics in theory and policy. It covers the basic theoretical approaches, shows how to do simulation work with the models, and discusses the full range of frictions that economists have studied to understand the impacts of monetary policy. Among the topics presented are money-in-the-utility function, cash-in-advance, and search models of money; informational, portfolio, and nominal rigidities; credit frictions; the open economy; and issues of monetary policy, including discretion and commitment, policy analysis in new Keynesian models, and monetary operating procedures. The use of models based on dynamic optimization and nominal rigidities in consistent general equilibrium frameworks, relatively new when introduced to students in the first edition of this popular text, has since become the method of choice of monetary policy analysis. This third edition reflects the latest advances in the field, incorporating new or expanded material on such topics as monetary search equilibria, sticky information, adaptive learning, state-contingent pricing models, and channel systems for implementing monetary policy. Much of the material on policy analysis has been reorganized to reflect the dominance of the new Keynesian approach. Monetary Theory and Policy continues to be the only comprehensive and up-to-date treatment of monetary economics, not only the leading text in the field but also the standard reference for academics and central bank researchers.
Author : Jordi Galí
Publisher : Princeton University Press
ISBN 13 : 1400866278
Total Pages : 295 pages
Book Rating : 4.4/5 (8 download)
Download or read book Monetary Policy, Inflation, and the Business Cycle written by Jordi Galí and published by Princeton University Press. This book was released on 2015-06-09 with total page 295 pages. Available in PDF, EPUB and Kindle. Book excerpt: The classic introduction to the New Keynesian economic model This revised second edition of Monetary Policy, Inflation, and the Business Cycle provides a rigorous graduate-level introduction to the New Keynesian framework and its applications to monetary policy. The New Keynesian framework is the workhorse for the analysis of monetary policy and its implications for inflation, economic fluctuations, and welfare. A backbone of the new generation of medium-scale models under development at major central banks and international policy institutions, the framework provides the theoretical underpinnings for the price stability–oriented strategies adopted by most central banks in the industrialized world. Using a canonical version of the New Keynesian model as a reference, Jordi Galí explores various issues pertaining to monetary policy's design, including optimal monetary policy and the desirability of simple policy rules. He analyzes several extensions of the baseline model, allowing for cost-push shocks, nominal wage rigidities, and open economy factors. In each case, the effects on monetary policy are addressed, with emphasis on the desirability of inflation-targeting policies. New material includes the zero lower bound on nominal interest rates and an analysis of unemployment’s significance for monetary policy. The most up-to-date introduction to the New Keynesian framework available A single benchmark model used throughout New materials and exercises included An ideal resource for graduate students, researchers, and market analysts
Author : Gita Gopinath
Publisher :
ISBN 13 :
Total Pages : 51 pages
Book Rating : 4.:/5 (236 download)
Download or read book Frequency of Price Adjustment and Pass-through written by Gita Gopinath and published by . This book was released on 2008 with total page 51 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.
