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

Peter Ireland

No 7511, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper focuses on the specification and stability of a dynamic, stochastic, general equilibrium model of the American 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 test detect instability in the estimated parameters, particularly in estimates of the representative household's discount factor. Evidently, more detailed descriptions of the economy are needed to explain movements in interest rates before and after 1979.

JEL-codes: E31 E32 (search for similar items in EconPapers)
Date: 2000-01
New Economics Papers: this item is included in nep-dge
Note: ME
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Citations: View citations in EconPapers (48)

Published as Ireland, Peter N. "Sticky-Price Models Of The Business Cycle: Specification And Stability," Journal of Monetary Economics, 2001, v47(1,Feb), 3-18.

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Related works:
Journal Article: Sticky-price models of the business cycle: Specification and stability (2001)
Working Paper: Sticky-Price Models of the Business Cycle: Specification and Stability (1999)
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