An Estimation of Sectoral Price Stickiness using Aggregate Data

Cheng-qi Hou () and Pin Wang ()
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Cheng-qi Hou: School of Economics and Management, Wuhan University, Wuhan, 430072, China.
Pin Wang: School of Finance, Zhongnan University of Economics and Law, Wuhan, 430073, China.

Journal for Economic Forecasting, 2014, issue 2, 53-70

Abstract: This article studies how to employ aggregate data to estimate sectoral price stickiness, which is described by the Calvo-style price setting. We find that sectoral price stickiness cannot be effectively estimated by the Bayesian approach of the multisector new Keynesian model that is used in Carvalho and Dam (2010). Then, we propose a structural GMM estimation of sectoral new Keynesian Phillips curves to obtain sectoral price stickiness and the results are well consistent with the available microeconomic evidence on price setting.

Keywords: sectoral price stickiness; sectoral new Keynesian Phillips curve; aggregate data; GMM; Bayesian approach (search for similar items in EconPapers)
JEL-codes: C36 E12 E31 (search for similar items in EconPapers)
Date: 2014
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