Predetermined Prices and the Persistent Effects of Money on Output

Michael Devereux and James Yetman

No 2917, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This Paper illustrates a model of predetermined pricing based on the work of Fischer (1977), where firms set a fixed schedule of nominal prices at the time of price readjustment. 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: Sticky prices; Predetermined prices; Money shocks (search for similar items in EconPapers)
JEL-codes: E31 E32 (search for similar items in EconPapers)
Date: 2001-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://cepr.org/publications/DP2917 (application/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: https://EconPapers.repec.org/RePEc:cpr:ceprdp:2917

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP2917

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().