|
EconStor >
Federal Reserve Bank of New York >
Staff Reports, Federal Reserve Bank of New York >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/10419/60529
|
| | |
| Title: | | US wage and price dynamics: A limited information approach  |
| Authors: | | Sbordone, Argia M. |
| Issue Date: | | 2006 |
| Series/Report no.: | | Staff Report, Federal Reserve Bank of New York 256 |
| Abstract: | | This paper analyzes the dynamics of prices and wages using a limited information approach to estimation. I estimate a two-equation model for the determination of prices and wages derived from an optimization-based dynamic model in which both goods and labor markets are monopolistically competitive; prices and wages can be reoptimized only at random intervals; and, when prices and wages are not reoptimized, they can be partially adjusted to previous-period aggregate inflation. The estimation procedure is a two-step minimum distance estimation that exploits the restrictions imposed by the model on a time-series representation of the data. In the first step, I estimate an unrestricted autoregressive representation of the variables of interest. In the second, I express the model solution as a constrained autoregressive representation of the data and define the distance between unconstrained and constrained representations as a function of the structural parameters that characterize the joint dynamics of inflation and labor share. This function summarizes the cross-equation restrictions between the model and the time-series representations of the data. I then estimate the parameters of interest by minimizing a quadratic function of that distance. I find that the estimated dynamics of prices and wages track actual dynamics quite well and that the estimated parameters are consistent with the observed length of nominal contracts. |
| Subjects: | | wage and price dynamics, nominal rigidities, minimum distance estimation |
| JEL: | | E32 C32 C52 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Staff Reports, Federal Reserve Bank of New York
|
| Files in This Item:
| |
|
| No. of Downloads:
| |
| last Month |
last 3 Month |
total |
|
|
|
|
|
| |
| | |
Download bibliographical data as:
BibTeX
|
| |
Share on:http://hdl.handle.net/10419/60529
|
Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.
|