Price Bargaining and the Business Cycle

Dennis Wesselbaum

Applied Economics Quarterly (formerly: Konjunkturpolitik), 2020, vol. 66, issue 1, 1-27

Abstract: This paper models a segmented production sector with price bargaining between the intermediate good firm and the final good firm. We show how to incorporate price bargaining in an otherwise standard New Keynesian model and discuss its macroeconomic implications. Estimating the model on U.S. data using Bayesian methods, we find that the intermediate good firm has 50 percent of the bargaining power. We find that the size of the bargaining power determines the quantitative and qualitative macroeconomic effects. -- Further, we quantify the size of switching costs: they are equal to about two percent of output. Shocks to switching costs are specific to this model and generate sizable macroeconomic fluctuations.

Keywords: Bayesian Estimation; Business Cycles; Monetary Policy; Price Bargaining; Switching Costs (search for similar items in EconPapers)
JEL-codes: E31 E52 L10 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.3790/aeq.66.1.1 (application/pdf)
Access to full text is restricted to subscribers (2008 onwards); Pay-per-view access from https://elibrary.duncker-humblot.com/journals/aeq (2008 onwards) and http://www.genios.de (2008 onwards)

Related works:
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:dah:aeqaeq:v66_y2020_i1_q1_p1-27

Ordering information: This journal article can be ordered from
https://www.duncker-humblot.de/zeitschriften/aeq

Access Statistics for this article

Applied Economics Quarterly (formerly: Konjunkturpolitik) is currently edited by Cinzia Alcidi, Christian Dreger and Daniel Gros

More articles in Applied Economics Quarterly (formerly: Konjunkturpolitik) from Duncker & Humblot GmbH, Berlin
Bibliographic data for series maintained by E-Publishing-Team ().