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dc.contributor.authorSbordone, Argia M.en_US
dc.date.accessioned2012-08-17T14:24:37Z-
dc.date.available2012-08-17T14:24:37Z-
dc.date.issued2006en_US
dc.identifier.urihttp://hdl.handle.net/10419/60529-
dc.description.abstractThis 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.en_US
dc.language.isoengen_US
dc.publisherFederal Reserve Bank of New York New York, NYen_US
dc.relation.ispartofseriesStaff Report, Federal Reserve Bank of New York 256en_US
dc.subject.jelE32en_US
dc.subject.jelC32en_US
dc.subject.jelC52en_US
dc.subject.ddc330en_US
dc.subject.keywordwage and price dynamics, nominal rigidities, minimum distance estimationen_US
dc.subject.stwLohnen_US
dc.subject.stwPreisen_US
dc.subject.stwInflationen_US
dc.subject.stwLohnrigiditäten_US
dc.subject.stwPreisrigiditäten_US
dc.subject.stwMonopolistischer Wettbewerben_US
dc.subject.stwLohnindexierungen_US
dc.subject.stwVAR-Modellen_US
dc.subject.stwUSAen_US
dc.titleUS wage and price dynamics: A limited information approachen_US
dc.typeWorking Paperen_US
dc.identifier.ppn519344561en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Staff Reports, Federal Reserve Bank of New York

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