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Title:A unifed framework for understanding and comparing dynamic wage and price setting models PDF Logo
Authors:Dixon, Huw David
Issue Date:2009
Series/Report no.:Cardiff Economics Working Papers E2009/20
Abstract:This paper argues that the cross-sectional approach to durations is essential to understand nominal rigidity because this captures the fact that price-spells are generated by firms' price-setting behavior. Since the distribution of durations is dominated by a proliferation of short contracts, the cross-sectional measure corrects for this by length-biased sampling. Modelling the price-spell durations in this way enables us to see how Taylor, Calvo and their generalizations relate to each other, and enable us to compare price-setting behavior for a given distribution of durations. We also show how the micro-data can be directly related to the macroeconomic pricing models in this setting.
Subjects:price-spell
steady state
hazard rate
Calvo
Taylor
JEL:E50
Document Type:Working Paper
Appears in Collections:Cardiff Economics Working Papers, Cardiff Business School, Cardiff University

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