Strategic Interaction among Heterogeneous Price-Setters in an Estimated DSGE Model

Olivier Coibion and Yuriy Gorodnichenko

No 93, Working Papers from Department of Economics, College of William and Mary

Abstract: We consider a dynamic stochastic general equilibrium (DSGE) model in which firms follow one of four price-setting regimes: sticky prices, sticky-information, rule-of-thumb, or full-information flexible prices. The parameters of the model, including the fractions of each type of firm, are estimated by matching the moments of the observed variables of the model to those found in the data. We find that sticky-price firms and sticky-information firms jointly account for over 80% of firms in the model. We compare the performance of our hybrid model to pure sticky-price and sticky-information models along various dimensions, including monetary policy implications.

Keywords: Heterogeneity; Price-setting; DSGE. (search for similar items in EconPapers)
JEL-codes: E3 E5 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2010-09-18
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: Strategic Interaction among Heterogeneous Price-Setters in an Estimated DSGE Model (2011)
Working Paper: Strategic Interaction Among Heterogeneous Price-Setters In An Estimated DSGE Model (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:cwm:wpaper:93

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