Economics, Econometrics and Finance
4 years ago

Endogenous price stickiness found to not drive business cycle fluctuations.

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Econometrica
Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?
V. V. Chari, Patrick J. Kehoe, Ellen R. McGrattan

Paper Summary

The article explores whether monetary shocks can cause business cycle fluctuations by studying how firms set prices in a staggered manner. The researchers find that in their model, staggered price-setting alone does not generate business cycle fluctuations.

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