Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153204
Authors: 
Lombardo, Giovanni
Vestin, David
Year of Publication: 
2007
Series/Report no.: 
ECB Working Paper 770
Abstract: 
This paper compares the welfare implications of two widely used pricing assumptions in the New-Keynesian literature: Calvo-pricing vs. Rotemberg-pricing. We show that despite the strong similarities between the two assumptions to a first order of approximation, in general they might entail different welfare costs at higher order of approximation. In the special case of non-distorted steady state, the two pricing assumptions imply identical welfare losses to a second order of approximation.
Subjects: 
Calvo price adjustment
inflation
Rotemberg price adjustment
second-order approximation
Welfare
JEL: 
E3
E5
Document Type: 
Working Paper

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