Predetermined Prices and the Persistent Effects of Money on Output

Michael B. Devereux () and James Yetman ()

Working Papers from Bank of Canada

Abstract: This paper illustrates a model of predetermined pricing, where firms set a fixed schedule of nominal prices at the time of price readjustment, based on the work of Fischer (1977). This type of price-setting specification cannot produce any excess persistence in a fixed-duration model of staggered prices, but we show that with a probabilistic model of price adjustment, as in Calvo (1983), a predetermined pricing specification can produce excess persistence. Moreover, in response to a money shock, the aggregate dynamics are very similar to those under a specification of fixed prices, the assumption underlying most recent dynamic sticky-price models.

Keywords: Transmission; of; monetary; policy (search for similar items in EconPapers)
JEL-codes: E30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-mon
Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
http://www.bankofcanada.ca/wp-content/uploads/2010/02/wp01-13.pdf

Related works:
Journal Article: Predetermined Prices and the Persistent Effects of Money on Output (2003)
Working Paper: Predetermined Prices and the Persistent Effects of Money on Output (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:bca:bocawp:01-13

Access Statistics for this paper

More papers in Working Papers from Bank of Canada
Address: 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada
Series data maintained by ().