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Persistence and Nominal Inertia in a Generalized Taylor Economy: How Longer Contracts Dominate Shorter Contracts

Huw Dixon () and Engin Kara ()

No E2007/1, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: We develop the Generalized Taylor Economy (GTE) in which there are many sectors with overlapping contracts of different lengths. In economies with the same average contract length, monetary shocks will be more persistent when longer contracts are present. Using the Bils-Klenow distribution of contract lengths, we find that the corresponding GTE tracks the US data well. When we choose a GTE with the same distribution of completed contract lengths as the Calvo, the economies behave in a similar manner.

Keywords: Persistence; Taylor contract; Calvo (search for similar items in EconPapers)
JEL-codes: E50 E24 E32 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2007-01
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Forthcoming in European Economic Review

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Related works:
Working Paper: Persistence and Nominal Inertia in a Generalized Taylor Economy: How Longer Contracts Dominate Shorter Contracts (2007) Downloads
Working Paper: Persistence and nominal inertia in a generalized Taylor economy: how longer contracts dominate shorter contracts (2005) Downloads
Working Paper: Persistence and Nominal Inertia in a Generalised Taylor Economy: How Loner Contracts Dominate Shorter Contracts (2005) Downloads
Working Paper: Persistence and Nominal Inertia in a Generalized Taylor Economy: How Longer Contracts Dominate Shorter Contracts (2005) Downloads
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