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Title:Real and nominal rigidities in price setting: A bayesian analysis using aggregate data PDF Logo
Authors:Yao, Fang
Issue Date:2009
Series/Report no.:SFB 649 discussion paper 2009,057
Abstract:This paper uses the Bayesian approach to solve and estimate a New Keynesian model augmented by a generalized Phillips curve, in which the shape of the price reset hazards can be identi…ed using aggregate data. My empirical result shows that a constant hazard function is easily rejected by the data. The empirical hazard function for post-1983 periods in the U.S. is consistent with micro evidence obtained using data from similar periods. The hazard for pre-1983 periods, however, exhibits a remarkable increasing pattern, implying that pricing decisions are characterized by both time- and state-dependent aspects. Additionally, real rigidity plays an important role, but not as big a role as found in empirical studies using limited information methods.
Subjects:Real rigidity
Nominal rigidity
Hazard function
Bayesian estimation
JEL:E12
E31
Document Type:Working Paper
Appears in Collections:SFB 649 Discussion Papers, HU Berlin

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