Inflation and Real Activity with Firm Level Productivity Shocks

Robert G. King, Alexander Wolman and Michael Dotsey
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Robert G. King: Boston University
Michael Dotsey: Federal Reserve Bank of Philadelphia

No 367, 2009 Meeting Papers from Society for Economic Dynamics

Abstract: The model's flexibility also allows us to parameterize it in ways that generate behavior consistent with some recent studies in the literature, namely Midrigan (2006) and Golosov and Lucas (2008). We can also use simple versions of the model to understand the relationships between price adjustment at the micro level and aggregated statistics such as the hazard rate. In particular, we find that the model is capable of producing flat hazards at the macro level, even though any firm who has just changed its price faces the upward sloping hazard common in state dependent models.

Date: 2009
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Related works:
Working Paper: Inflation and Real Activity with Firm Level Productivity Shocks (2018)
Working Paper: Inflation and real activity with firm-level productivity shocks (2013)
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