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Generalized Calvo Approach

Author

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  • Nikolay Arefiev

    (National Research University “Higher School of Economics”)

Abstract

This paper presents a generalized application of the Calvo pricing approach, assuming that in each particular market, both prices and quantities are adjusted according to the Calvo approach. With certain restrictions placed on the parameters, the system of log-linearized equations that I derived using the generalized Calvo approach produces similar dynamics within the economy as are produced by the system that one would obtain assuming Calvo pricing, consumption habit formation, capital adjustment costs, investment adjustment costs, search-and-match at the labor market, and smooth money adjustment. Therefore, the generalized Calvo approach proposed here acts as a uni cation of many frictions used in conventional dynamic stochastic general equilibrium models.

Suggested Citation

  • Nikolay Arefiev, 2011. "Generalized Calvo Approach," HSE Working papers WP BRP 06/EC/2011, National Research University Higher School of Economics.
    • Handle: RePEc:hig:wpaper:06/ec/2011
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    DSGE; frictions; Calvo pricing; consumption habit formation; capital adjustment costs; investment adjustment costs; search-and-match.;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • 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
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D59 - Microeconomics - - General Equilibrium and Disequilibrium - - - Other

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