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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

Abstract: 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
Date: 2010-06
New Economics Papers: this item is included in nep-cba, nep-dge, nep-eec and nep-mon
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Citations: View citations in EconPapers (3) Track citations by RSS feed

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http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... o/10/Fic/dt1019e.pdf First version, June 2010 (application/pdf)

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Journal Article: Micro‐based Estimates of Heterogeneous Pricing Rules: The United States vs. the Euro Area (2010) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1019

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