Pricing To Market In Business Cycle Models

Lukasz Drozd
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Lukasz Drozd: University of Pennsilvania
Authors registered in the RePEc Author Service: Jaromir Nosal

No 1108, 2012 Meeting Papers from Society for Economic Dynamics

Abstract: This paper evaluates the performance of leading micro-founded pricing-to-market frictions vis-a-vis a set of robust stylized facts about international prices. In order to make that evaluation meaningful, we embed each friction into a unified IRBC framework and parameterize the models in a uniform way. Our goal is to evaluate the broad-based applicability of these frictions for policy-oriented DSGE modeling by documenting their strengths and weaknesses. We make three points: (i) the mechanisms generating pricing to market are not always neutral to business cycle dynamics of quantities, (ii) some mechanisms require producer markups at least 50% to account for the full range of estimates of the empirical exchange rate pass-through to export prices of 35%-50%, (iii) some frictions crucially depend on a particular driver of uncertainty in the underlying model.

Date: 2012
New Economics Papers: this item is included in nep-dge and nep-opm
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Citations: View citations in EconPapers (10)

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Related works:
Working Paper: Pricing to Market in Business Cycle Models (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed012:1108

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