Persistence Endogeneity Via Adjustment Costs: An Assessment based on Bayesian Estimations

Sebastian Sienknecht ()
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Sebastian Sienknecht: School of Economics and Business Administration, Friedrich Schiller University Jena

No 2010-057, Jena Economics Research Papers from Friedrich-Schiller-University Jena

Abstract: This paper estimates a dynamic stochastic general equilibrium (DSGE) model for the European Monetary Union by using Bayesian techniques. A salient feature of the model is an extension of the typically postulated quadratic cost structure for the monopolistic choice of price variables. As shown in Sienknecht (2010a), the enlargement of the original formulation by Rotemberg (1983) and Hairault and Portier (1993) leads to structurally more sophisticated inflation schedules than in the staggering environment by Calvo (1983) with rule-of-thumb setters. In particular, a desired lagged inflation term always arises toghether with a two-period-ahead expectational expression. The two terms are directly linked by a novel structural parameter. We confront the relationships obtained by Sienknecht (2010a) against European data and compare their data description performance against the widespread extension of the Calvo setting with rule-of-thumb behavior.

Keywords: Bayesian; Simulation; Indexation; Model Comparison (search for similar items in EconPapers)
JEL-codes: C11 C15 E31 E32 (search for similar items in EconPapers)
Date: 2010-08-24
New Economics Papers: this item is included in nep-cba, nep-dge, nep-eec and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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