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Monetary neutrality in one specific class of DGE model with staggered prices

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  • Kirill Sosunov

Abstract

In this paper I show that monetary neutrality proposition holds for one specific parameterization of a dynamic general equilibrium model of monopolistic competition even if nominal rigidity in a form of staggered price setting or partial adjustment price-setting mechanism is present in a model. This parameterization is a result of a zero profit condition for intermediate goods producers and it requires that degree of increasing returns in intermediate goods production is equal to price- marginal costs markup.

Suggested Citation

  • Kirill Sosunov, 2001. "Monetary neutrality in one specific class of DGE model with staggered prices," Macroeconomics 0112003, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:0112003
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    References listed on IDEAS

    as
    1. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2000. "Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?," Econometrica, Econometric Society, vol. 68(5), pages 1151-1180, September.
    2. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
    3. Laurence Ball & David Romer, 1990. "Real Rigidities and the Non-Neutrality of Money," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(2), pages 183-203.
    4. Farmer, Roger E.A., 2000. "Two New Keynesian Theories Of Sticky Prices," Macroeconomic Dynamics, Cambridge University Press, vol. 4(1), pages 74-107, March.
    5. Farmer, Roger E A, 1991. "Sticky Prices," Economic Journal, Royal Economic Society, vol. 101(409), pages 1369-1379, November.
    6. Gali Jordi, 1994. "Monopolistic Competition, Business Cycles, and the Composition of Aggregate Demand," Journal of Economic Theory, Elsevier, vol. 63(1), pages 73-96, June.
    7. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-666, September.
    8. Kevin Huang & Z. Liu, "undated". "Staggered contracts and business cycle persistence," Working Papers 2000-08, Utah State University, Department of Economics.
    9. Michael T. Kiley, 1997. "Staggered price setting and real rigidities," Finance and Economics Discussion Series 1997-46, Board of Governors of the Federal Reserve System (U.S.).
    10. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    11. repec:cup:macdyn:v:4:y:2000:i:1:p:74-107 is not listed on IDEAS
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    More about this item

    Keywords

    macroeconomics business cycles staggered prices;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • F49 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Other
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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