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Generalized Taylor and Generalized Calvo Price and Wage-Setting: Micro Evidence with Macro Implications

Huw Dixon () and Hervé Le Bihan ()

No 3119, CESifo Working Paper Series from CESifo Group Munich

Abstract: The Generalized Calvo and the Generalized Taylor model of price and wage-setting are, unlike the standard Calvo and Taylor counter-parts, exactly consistent with the distribution of durations observed in the data. Using price and wage micro-data from a major euro-area economy (France), we develop calibrated versions of these models. We assess the consequences for monetary policy transmission by embedding these calibrated models in a standard DSGE model. The Generalized Taylor model is found to help rationalizing the hump-shaped response of inflation, without resorting to the counterfactual assumption of systematic wage and price indexation.

Keywords: contract length; steady state; hazard rate; Calvo; Taylor; wage-setting; price-setting (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 J30 (search for similar items in EconPapers)
Date: 2010
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Related works:
Journal Article: Generalised Taylor and Generalised Calvo Price and Wage Setting: Micro‐evidence with Macro Implications (2012) Downloads
Working Paper: Generalized Taylor and Generalized Calvo price and wage-setting: micro evidence with macro implications (2011) Downloads
Working Paper: Generalized Taylor and Generalized Calvo price and wage-setting: micro evidence with macro implications (2011) Downloads
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