Microeconomic rigidities and aggregate price dynamics
Author
dc.contributor.author
Caballero, Ricardo
Author
dc.contributor.author
Engel Goetz, Eduardo
Admission date
dc.date.accessioned
2017-11-07T20:31:14Z
Available date
dc.date.available
2017-11-07T20:31:14Z
Publication date
dc.date.issued
1993
Cita de ítem
dc.identifier.citation
European Economic Review Vol. 37, No. 4, pp. 697 - 711, Enero, 1993
es_ES
Identifier
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0014-2921
Identifier
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https://repositorio.uchile.cl/handle/2250/145508
Abstract
dc.description.abstract
This paper is an attempt to enrich the characterization of the sluggish behavior of the aggregate
price level. Our contribution to this vast literature is to explicitly consider microeconomic
heterogeneity and its interaction with nonlinear microeconomic price adjustment policies. The
model we propose outperforms the constant-probability-of-adjustment/partial-adjustment model
in describing the path of postwar U.S. inflation. Using only aggregate data, we infer that the
probability that a firm adjusts its price depends on the sign and the magnitude of the deviation
of the price from its target Level. At the aggregate level we find that the aggregate price level
responds tess to negative shocks than to positive shocks, that the size of this asymmetry
increases with the size of the shock, and that the number of firms changing their prices - and
therefore the flexibility of the price ieve1 to aggregate shocks - varies endogenously over time in
response to changes in economic conditions.