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Title:Aggregate hazard function in price-setting: A bayesian analysis using macro data PDF Logo
Authors:Yao, Fang
Issue Date:2010
Series/Report no.:SFB 649 discussion paper 2010,020
Abstract:This paper presents an approach to identify aggregate price reset hazards from the joint dynamic behavior of inflation and macroeconomic aggregates. The identification is possible due to the fact that inflation is composed of current and past reset prices and that the composition depends on the price reset hazard function. The derivation of the generalized NKPC links those compostion effects to the hazard function, so that only aggregate data is needed to extract information about the price reset hazard function. The empirical hazard function is generally increasing with the age of prices, but with spikes at the 1st and 4th quarters. The implication of this finding for sticky price modeling is that the pricing decision is characterized by both time- and state-dependent aspects.
Subjects:Sticky prices
Aggregate hazard function
Bayesian estimation
JEL:E12
E31
Document Type:Working Paper
Appears in Collections:SFB 649 Discussion Papers, HU Berlin

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