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Endogenous Price Stickiness and Business Cycle Persistence

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Author Info
Kiley, Michael T

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Abstract

Sticky prices help generate persistent output fluctuations in response to aggregate demand shocks. This paper develops a model in which price stickiness is endogenous and generates persistent output fluctuations. Since the degree of price stickiness should be lower in high-inflation economies, output persistence should also be lower in high-inflation economies. Estimation of the model, as well as simple autocorrelations of detrended real output, suggest that, indeed, output fluctuations about trend are less persistent in high-inflation economies.

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 32 (2000)
Issue (Month): 1 (February)
Pages: 28-53
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Handle: RePEc:mcb:jmoncb:v:32:y:2000:i:1:p:28-53

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Bruno, Michael & Easterly, William, 1998. "Inflation crises and long-run growth," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 3-26, February. [Downloadable!] (restricted)
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  2. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-34, June.
  3. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February. [Downloadable!] (restricted)
  4. Alberro, Jose, 1981. "The Lucas hypothesis on the Phillips Curve : Further international evidence," Journal of Monetary Economics, Elsevier, vol. 7(2), pages 239-250. [Downloadable!] (restricted)
  5. Caballero, Ricardo J. & Engel, Eduardo M. R. A., 1993. "Microeconomic rigidities and aggregate price dynamics," European Economic Review, Elsevier, vol. 37(4), pages 697-711, May. [Downloadable!] (restricted)
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  6. Julio J. Rotemberg & Michael Woodford, 1994. "Is the Business Cycles a Necessary Consequence of Stochastic Growth?," NBER Working Papers 4650, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Ricardo J. Caballero & Eduardo M.R.A. Engel, 1992. "Price Rigidities, Asymmetries, and Output Fluctuations," NBER Working Papers 4091, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Timothy Cogley & James M. Nason, 1993. "Output dynamics in real business cycle models," Working Papers in Applied Economic Theory 93-10, Federal Reserve Bank of San Francisco.
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  9. Romer, David, 1990. "Staggered price setting with endogenous frequency of adjustment," Economics Letters, Elsevier, vol. 32(3), pages 205-210, March. [Downloadable!] (restricted)
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  10. Caballero, R.J., 1989. "Time Dependent Rules, Aggregate Stickiness And Information Externalities," Discussion Papers 1989_11, Columbia University, Department of Economics.
  11. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April. [Downloadable!] (restricted)
  12. Lucas, Robert E., 1977. "Understanding business cycles," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 5(1), pages 7-29, January. [Downloadable!] (restricted)
  13. Laurence Ball & N. Gregory Mankiw, 1995. "A Sticky-Price Manifesto," NBER Working Papers 4677, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Laurence Ball & N. Gregory Mankiw & David Romer, 1988. "The New Keynsesian Economics and the Output-Inflation Trade-off," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1988-1), pages 1-82. [Downloadable!]
  15. repec:fth:coluec:428 is not listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Yuriy Gorodnichenko, 2008. "Endogenous information, menu costs and inflation persistence," NBER Working Papers 14184, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Giovanni Lombardo, . "Sticky Prices, Markup and the Business Cycle: Some Evidence," Discussion Papers 01/06, Department of Economics, University of York. [Downloadable!]
  3. Kevin X.D. Huang & Zheng Liu, 2004. "Multiple stages of processing and the quantity anomaly in international business cycle models," Research Working Paper RWP 04-05, Federal Reserve Bank of Kansas City. [Downloadable!]
    Other versions:
  4. Caleiro, António, 2008. "How Can Voters Classify an Incumbent under Output Persistence," Economics Discussion Papers 2008-16, Kiel Institute for the World Economy. [Downloadable!]
  5. Konstantin Styrin & Oleg Zamulin, 2003. "Estimating Price Rigidities in the Russian Real Estate Markets," Working Papers w0026, Center for Economic and Financial Research (CEFIR). [Downloadable!]
  6. Bonomo, Marco Antônio Cesar & Carvalho, Carlos Viana de, 2003. "Endogenous time-dependent rules and the costs of disinflation with imperfect credibility," Economics Working Papers (Ensaios Economicos da EPGE) 505, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
    Other versions:
  7. George J. Bratsiotis & Christopher Martin, 2003. "Monetary Policy Rules, Real Rigidity and Endogenous Persistence," Economics and Finance Discussion Papers 02-31, Economics and Finance Section, School of Social Sciences, Brunel University. [Downloadable!]
    Other versions:
  8. Peter McAdam & Alpo Willman, 2007. "State-dependency and firm-level optimization - a contribution to Calvo price staggering," Working Paper Series 806, European Central Bank. [Downloadable!]
  9. Kevin X. D. Huang & Zheng Liu & Louis Phaneuf, 2000. "On the Transmission of Monetary Policy Shocks," Cahiers de recherche CREFE / CREFE Working Papers 112, CREFE, Université du Québec à Montréal, revised Sep 2001. [Downloadable!]
  10. Martin Boileau & Marc-André Letendre, 2004. "Inventories, Sticky Prices and the Propogation of Nominal Shocks," Department of Economics Working Papers 2004-03, McMaster University. [Downloadable!]
  11. Emmanuel De Veirman, 2007. "Which nonlinearity in the Phillips curve? The absence of accelerating deflation in Japan," Reserve Bank of New Zealand Discussion Paper Series DP2007/14, Reserve Bank of New Zealand. [Downloadable!]
    Other versions:
  12. Kevin X. D. Huang & Zheng Liu, 2001. "Input-Output Structure and Nominal Staggering: The Persistence Problem Revisited," Cahiers de recherche CREFE / CREFE Working Papers 145, CREFE, Université du Québec à Montréal. [Downloadable!]
  13. Kevin X.D. Huang & Zheng Liu, 2003. "Production, Trade, and International Comovement," Emory Economics 0308, Department of Economics, Emory University (Atlanta). [Downloadable!]
  14. Bruchez, Pierre-Alain, 2007. "A Hybrid Sticky-Price and Sticky-Information Model," MPRA Paper 3540, University Library of Munich, Germany. [Downloadable!]
  15. Belbute, José & Caleiro, António, 2009. "Measuring the Persistence on Consumption in Portugal," MPRA Paper 15116, University Library of Munich, Germany. [Downloadable!]
  16. Hasan Bakhshi & Pablo Burriel-Llombart & Hashmat Khan & Barbara Rudolf, . "Endogenous price stickiness, trend inflation, and the New Keynesian Phillips curve," Bank of England working papers 191, Bank of England. [Downloadable!]
    Other versions:
  17. Susanto Basu & Alan M. Taylor, 1999. "Business Cycles in International Historical Perspective," NBER Working Papers 7090, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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