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Aggregation and Optimization with State-Dependent Pricing: A Comment

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  • Vladislav Damjanovic
  • Charles Nolan

Abstract

A key argument in Caplin and Leahy (1997) states that the correlation between monetary shocks and output is falling in the variance of the money supply. We demonstrate that this conclusion depends on solving for the correlation in the nonstationary state of the model. In the stationary state, that correlation is initially rising. Copyright The Econometric Society 2006.

Suggested Citation

  • Vladislav Damjanovic & Charles Nolan, 2006. "Aggregation and Optimization with State-Dependent Pricing: A Comment," Econometrica, Econometric Society, vol. 74(2), pages 565-573, March.
    • Handle: RePEc:ecm:emetrp:v:74:y:2006:i:2:p:565-573
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    File URL: http://hdl.handle.net/10.1111/j.1468-0262.2006.00672.x
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    Cited by:

    1. Vladislav Damjanovic & Charles Nolan, 2007. "S,s Pricing in a General Equilibrium Model with Heterogeneous Sectors," CDMA Working Paper Series 200709, Centre for Dynamic Macroeconomic Analysis.
    2. Zakaria Babutsidze, 2012. "Asymmetric (S,s) Pricing: Implications for Monetary Policy," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 177-204.
    3. Andrew Caplin & John Leahy, 2010. "Economic Theory and the World of Practice: A Celebration of the ( S , s ) Model," Journal of Economic Perspectives, American Economic Association, vol. 24(1), pages 183-202, Winter.
    4. repec:spo:wpmain:info:hdl:2441/53r60a8s3kup1vc9l564lcia3 is not listed on IDEAS
    5. repec:hal:spmain:info:hdl:2441/53r60a8s3kup1vc9l564lcia3 is not listed on IDEAS
    6. Damjanovic, Vladislav & Nolan, Charles, 2012. "S,s pricing in a dynamic equilibrium model with heterogeneous sectors," Journal of Economic Dynamics and Control, Elsevier, vol. 36(4), pages 550-567.

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