EconPapers    
Economics at your fingertips  
 

Firm-Specific Production Factors in a DSGE Model with Taylor Price Setting

Grégory de Walque (), Frank Smets and Raf Wouters ()

International Journal of Central Banking, 2006, vol. 2, issue 3

Abstract: Using Bayesian likelihood methods, this paper estimates a dynamic stochastic general equilibrium model with Taylor contracts and firm-specific factors in the goods market on euro-area data. The paper shows how the introduction of firmspecific factors improves the empirical fit of the model and reduces the estimated contract length to a duration of four quarters, which is more consistent with the empirical evidence on average price durations in the euro area. However, in order to obtain this result, the estimated real rigidity is very large, either in the form of a very large constant elasticity of substitution between goods or in the form of an endogenous elasticity of substitution that is very sensitive to the relative price. Finally, the paper also investigates the implications of these estimates for the distribution of prices and quantities across the various goods sectors.

JEL-codes: E1 E3 (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18) Track citations by RSS feed

Downloads: (external link)
http://www.ijcb.org/journal/ijcb06q3a4.htm (application/pdf)
http://www.ijcb.org/journal/ijcb06q3a4.pdf (text/html)

Related works:
Working Paper: Firm-specific production factors in a DSGE model with Taylor price setting (2006) Downloads
Working Paper: Firm-specific production factors in a DSGE model with Taylor price setting (2006) Downloads
Working Paper: Firm-Specific Production Factors in a DSGE Model with Taylor Price Setting (2006) Downloads
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:ijc:ijcjou:y:2006:q:3:a:4

Access Statistics for this article

International Journal of Central Banking is currently edited by Loretta J. Mester

More articles in International Journal of Central Banking from International Journal of Central Banking
Bibliographic data for series maintained by Bank for International Settlements ().

 
Page updated 2019-03-31
Handle: RePEc:ijc:ijcjou:y:2006:q:3:a:4