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Strategic Interaction Among Heterogeneous Price-Setters In An Estimated DSGE Model

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Author Info
Olivier Coibion
Yuriy Gorodnichenko

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Abstract

We consider a DSGE model in which firms follow one of four price-setting regimes: sticky prices, sticky-information, rule-of-thumb, or full-information flexible prices. The parameters of the model, including the fractions of each type of firm, are estimated by matching the moments of the observed variables of the model to those found in the data. We find that sticky-price firms and sticky-information firms jointly account for over 80% of firms in the model, with the rest largely accounted for by rule-of-thumb firms. We compare the performance of our hybrid model to pure sticky-price and sticky-information models along various dimensions, including monetary policy implications.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14323.

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Date of creation: Sep 2008
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Handle: RePEc:nbr:nberwo:14323

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E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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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 & Serena Ng, 2009. "Estimation of DSGE Models When the Data are Persistent," NBER Working Papers 15187, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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