Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152852
Authors: 
Coenen, Günter
Levin, Andrew T.
Year of Publication: 
2004
Series/Report no.: 
ECB Working Paper 418
Abstract: 
We formulate a generalized price-setting framework that incorporates staggered contracts of multiple durations and that enables us to directly identify the influences of nominal vs. real rigidities. Using German macroeconomic data over the period 1975Q1 through 1998Q4 toestimate this framework, we find that the data is well-characterized by a truncated Calvostyle distribution with an average duration of about two quarters. We also find that new contracts exhibit very low sensitivity to marginal cost, corresponding to a relatively high degree of real rigidity. Finally, our results indicate that backward-looking behavior is not needed to explain the aggregate data, at least in an environment with a stable monetary policy regime and a transparent and credible inflation objective.
Subjects: 
Inflation persistence
nominal rigidity
overlapping contracts
real rigidity
simulation-based indirect inference
JEL: 
E31
E52
Document Type: 
Working Paper

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