Micro-based estimates of heterogeneous pricing rules: the united states vs. The euro area
Luis Alvarez and
Pablo Burriel ()
No 1019, Working Papers from Banco de España, Working Papers Homepage
This paper presents US and euro area estimates for a fully heterogeneous model, in which there is a continuum of f rms setting prices with a constant probability of adjustment, which may differ from f rm to f rm. The estimated model accurately matches the empirical distribution function of individual price durations for the US and the euro area. Incorporating these micro based pricing rules into a DSGE model, we f nd that nominal shocks have a greater real impact in the fully heterogeneous economy than in the standard Calvo model. We also f nd that nominal and real shocks bring about a reallocation of resources among sectors. Monetary policy is found to have a greater real impact in the euro area than in the United States.
Keywords: price setting; heterogeneity; DSGE; Calvo model (search for similar items in EconPapers)
JEL-codes: C40 D40 E30 (search for similar items in EconPapers)
Pages: 35 pages
New Economics Papers: this item is included in nep-cba, nep-dge, nep-eec and nep-mon
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http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... o/10/Fic/dt1019e.pdf First version, June 2010 (application/pdf)
Journal Article: Micro‐based Estimates of Heterogeneous Pricing Rules: The United States vs. the Euro Area (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1019
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