Generalized Taylor and Generalized Calvo price and wage-setting: micro evidence with macro implications

Huw Dixon and Hervé Le Bihan

No E2011/25, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: The Generalized Calvo and the Generalized Taylor models of price and wage-setting are, unlike the standard Calvo and Taylor counterparts, exactly consistent with the distribution of durations observed in the data. Using price and wage micro-data from a major euro-area economy (France), we develop calibrated versions of these models. We assess the consequences for monetary policy transmission by embedding these calibrated models in a standard DSGE model. The Generalized Taylor model is found to help rationalizing the humpshaped and persistent response of inflation, without resorting to the counterfactual assumption of systematic wage and price indexation.

Keywords: Contract length; steady state; hazard rate; Calvo; Taylor; wage-setting; price-setting (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 J30 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2011-10
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Generalised Taylor and Generalised Calvo Price and Wage Setting: Micro‐evidence with Macro Implications (2012)
Working Paper: Generalized Taylor and Generalized Calvo price and wage-setting: micro evidence with macro implications (2011)
Working Paper: Generalized Taylor and Generalized Calvo Price and Wage-Setting: Micro Evidence with Macro Implications (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:cdf:wpaper:2011/25

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