Price Setting in a Model with Production Chains: Evidence From Sectoral Data
Reconciling the high frequency of price changes at the micro level and their apparent rigidity at the aggregate level has been the subject of considerable debate in macroeconomics recently. In this paper I show that incorporating production chains in a standard New- Keynesian model replicates two st...
Gespeichert in:
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| Format: | Elektronisch E-Book |
| Sprache: | English |
| Veröffentlicht: |
Washington, D.C
International Monetary Fund
2010
|
| Schriftenreihe: | IMF Working Papers
Working Paper No. 10/82 |
| Online-Zugang: | UBW01 UEI01 LCO01 SBR01 UER01 SBG01 UBG01 FAN01 UBT01 FKE01 UBY01 UBA01 FLA01 UBM01 UPA01 UBR01 FHA01 FNU01 BSB01 TUM01 Volltext |
| Zusammenfassung: | Reconciling the high frequency of price changes at the micro level and their apparent rigidity at the aggregate level has been the subject of considerable debate in macroeconomics recently. In this paper I show that incorporating production chains in a standard New- Keynesian model replicates two stylized facts about the data. First, sectoral prices respond with significantly different speeds to aggregate shocks. Meanwhile, the responses to sectorspecific shocks are similar. Second, the standard price setting models are unable to quantitatively match the amount of monetary non-neutrality observed in the data. I argue, First, that the input-output linkages in production generate different responses to aggregate shocks across sectors. Second, calibrating this model to the US data can create five times more monetary non-neutrality in response to nominal shocks compared to an equivalent homogeneous economy with intermediate inputs. Finally, the model implies that upstream industries respond faster to aggregate shocks compared to downstream industries. I show that this prediction is supported by the data |
| Beschreibung: | 1 Online-Ressource (50 p) |
| ISBN: | 1451982666 9781451982664 |
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| series2 | IMF Working Papers |
| spelling | Shamloo, Maral Verfasser aut Price Setting in a Model with Production Chains Evidence From Sectoral Data Shamloo, Maral Washington, D.C International Monetary Fund 2010 1 Online-Ressource (50 p) txt rdacontent c rdamedia cr rdacarrier IMF Working Papers Working Paper No. 10/82 Reconciling the high frequency of price changes at the micro level and their apparent rigidity at the aggregate level has been the subject of considerable debate in macroeconomics recently. In this paper I show that incorporating production chains in a standard New- Keynesian model replicates two stylized facts about the data. First, sectoral prices respond with significantly different speeds to aggregate shocks. Meanwhile, the responses to sectorspecific shocks are similar. Second, the standard price setting models are unable to quantitatively match the amount of monetary non-neutrality observed in the data. I argue, First, that the input-output linkages in production generate different responses to aggregate shocks across sectors. Second, calibrating this model to the US data can create five times more monetary non-neutrality in response to nominal shocks compared to an equivalent homogeneous economy with intermediate inputs. Finally, the model implies that upstream industries respond faster to aggregate shocks compared to downstream industries. I show that this prediction is supported by the data Online-Ausg http://elibrary.imf.org/view/IMF001/10872-9781451982664/10872-9781451982664/10872-9781451982664.xml Verlag URL des Erstveröffentlichers Volltext |
| spellingShingle | Shamloo, Maral Price Setting in a Model with Production Chains Evidence From Sectoral Data |
| title | Price Setting in a Model with Production Chains Evidence From Sectoral Data |
| title_auth | Price Setting in a Model with Production Chains Evidence From Sectoral Data |
| title_exact_search | Price Setting in a Model with Production Chains Evidence From Sectoral Data |
| title_exact_search_txtP | Price Setting in a Model with Production Chains Evidence From Sectoral Data |
| title_full | Price Setting in a Model with Production Chains Evidence From Sectoral Data Shamloo, Maral |
| title_fullStr | Price Setting in a Model with Production Chains Evidence From Sectoral Data Shamloo, Maral |
| title_full_unstemmed | Price Setting in a Model with Production Chains Evidence From Sectoral Data Shamloo, Maral |
| title_short | Price Setting in a Model with Production Chains |
| title_sort | price setting in a model with production chains evidence from sectoral data |
| title_sub | Evidence From Sectoral Data |
| url | http://elibrary.imf.org/view/IMF001/10872-9781451982664/10872-9781451982664/10872-9781451982664.xml |
| work_keys_str_mv | AT shamloomaral pricesettinginamodelwithproductionchainsevidencefromsectoraldata |