Sticky-Price Models of the Business Cycle: Specification and Stability

Peter Ireland ()

No 426, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: This paper focuses on the specification and stability of a dynamic, stochastic, general equilibrium model of the business cycle with sticky prices. Maximum likelihood estimates reveal that the data prefer a version of the model in which adjustment costs apply to the price level but not to the inflation rate. Formal hypothesis tests provide evidence of instability in the estimated parameters, concentrated in the Euler equation linking consumption growth to the interest rate.

Keywords: Sticky prices; Business Cycles (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge
Date: 1999-07-28
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Published in Journal of Monetary Economics, 2001, 47:1, 3-18.

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Related works:
Working Paper: Sticky-Price Models of the Business Cycle: Specification and Stability (2000)
Journal Article: Sticky-price models of the business cycle: Specification and stability (2001)
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Persistent link: http://EconPapers.repec.org/RePEc:boc:bocoec:426

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