Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152923
Authors: 
Dixon, Huw
Kara, Engin
Year of Publication: 
2005
Series/Report no.: 
ECB Working Paper 489
Abstract: 
In this paper we develop the Generalized Taylor Economy (GTE) in which there are many sectors with overlapping contracts of different lengths. In economies with the same average contract length, monetary shocks will be more persistent when longer contracts are present. We are able to solve the puzzle of why Calvo contracts appear to be more persistent than simple Taylor contracts: it arises because of the distribution of contract lengths. When we choose a GTE with the same distribution of completed contract lengths as the Calvo, the economies behave in a similar manner.
Subjects: 
Calvo
Persistence
Taylor contract
JEL: 
E50
E24
E32
E52
Document Type: 
Working Paper

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