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Author: Gita Gopinath
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 54
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Book Description
The closed and open economy literatures work on evaluating the role of real rigidities, but in parallel. This paper brings the two literatures together. We use international price data and exchange rate shocks to evaluate the importance of real rigidities in price setting. We show that consistent with the presence of real rigidities the response of reset-price inflation to exchange rate shocks depicts significant persistence. Individual import prices, conditional on changing, respond to exchange rate shocks prior to the last price change. At the same time aggregate reset-price inflation for imports, like that for consumer prices, depicts little persistence. Competitor prices affect firm pricing, and exchange rate pass-through into import prices is greater in response to trade-weighted as opposed to bilateral exchange rate shocks. We quantitatively evaluate sticky price models (Calvo and menu cost) with variable markups at the wholesale level and constant markups at the retail level, consistent with empirical evidence. Variable markups alone generate price sluggishness at the aggregate level, while they fall short of matching price persistence at the micro level. Finally, variable markups magnify the size of the contract multiplier, but their absolute effects are modest unless they are coupled with exogenous sources of persistence.
Author: Gita Gopinath
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 54
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Book Description
The closed and open economy literatures work on evaluating the role of real rigidities, but in parallel. This paper brings the two literatures together. We use international price data and exchange rate shocks to evaluate the importance of real rigidities in price setting. We show that consistent with the presence of real rigidities the response of reset-price inflation to exchange rate shocks depicts significant persistence. Individual import prices, conditional on changing, respond to exchange rate shocks prior to the last price change. At the same time aggregate reset-price inflation for imports, like that for consumer prices, depicts little persistence. Competitor prices affect firm pricing, and exchange rate pass-through into import prices is greater in response to trade-weighted as opposed to bilateral exchange rate shocks. We quantitatively evaluate sticky price models (Calvo and menu cost) with variable markups at the wholesale level and constant markups at the retail level, consistent with empirical evidence. Variable markups alone generate price sluggishness at the aggregate level, while they fall short of matching price persistence at the micro level. Finally, variable markups magnify the size of the contract multiplier, but their absolute effects are modest unless they are coupled with exogenous sources of persistence.
Author: Jacques Morisset
Publisher: World Bank Publications
ISBN:
Category : Analisis econometrico
Languages : en
Pages : 36
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Book Description
Author: Carlos Thomas Borao
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
I analyze the effect of search frictions on inflation dynamics, in a New Keynesian model where firms make both pricing and vacancy posting decisions. I find that search frictions create real rigidities in price setting. This mechanism flattens the New Keynesian Phillips curve, relative both to the standard model with a frictionless labor market and a model where pricing and vacancy posting decisions are made by different subsets of firms. This helps the model improve its empirical performance along a number of dimensions. First, inflation becomes more persistent. Second, output responses to monetary shocks become larger and more persistent. Finally, unemployment becomes more volatile. [Resumen de autor]
Author: Camila Casas
Publisher: International Monetary Fund
ISBN: 1484330609
Category : Business & Economics
Languages : en
Pages : 62
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Book Description
Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer’s currency or in local currency. We model instead a ‘dominant currency paradigm’ for small open economies characterized by three features: pricing in a dominant currency; pricing complementarities, and imported input use in production. Under this paradigm: (a) the terms-of-trade is stable; (b) dominant currency exchange rate pass-through into export and import prices is high regardless of destination or origin of goods; (c) exchange rate pass-through of non-dominant currencies is small; (d) expenditure switching occurs mostly via imports, driven by the dollar exchange rate while exports respond weakly, if at all; (e) strengthening of the dominant currency relative to non-dominant ones can negatively impact global trade; (f) optimal monetary policy targets deviations from the law of one price arising from dominant currency fluctuations, in addition to the inflation and output gap. Using data from Colombia we document strong support for the dominant currency paradigm.
Author: Torben M. Andersen
Publisher: Oxford University Press on Demand
ISBN: 9780198287605
Category : Business & Economics
Languages : en
Pages : 186
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Book Description
The price adjustment process is crucial to almost any macroeconomic issue. Current macroeconomic literature features widely different models ranking from instantaneous price adjustment to completely rigid prices. Professor Andersen provides a comprehensive analysis of reasons why prices may fail to adjust instantaneously to changes in market conditions. This unified treatment will allow the reader to understand the mechanisms at work without becoming lost in technical details. This volume covers both real and nominal price rigidities and integrates existing results from the literature with new results on causes for failures of price adjustment. The analysis of real price rigidities includes inventories, customer markets, search and collusive behaviour. Due to the focus on macroeconomic implications, the analysis of nominal price rigidities is extensive and includes menu costs, informational problems, asynchronized price setting as well as the interaction between price and wage setting. Professor Andersen's own theoretical work on imperfect information, a prime source of price and wage rigidity, is given prominence in the book. The volume is thus a combination of a valuable survey of the literature, and an original expression of future possible research avenues.
Author: Carlos Thomas
Publisher:
ISBN:
Category :
Languages : en
Pages : 43
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Book Description
Author: N. Gregory Mankiw
Publisher:
ISBN: 9780262631341
Category : Business & Economics
Languages : en
Pages : 468
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Book Description
New keynesian economics/ed. by N. Gregory Mankiw.-v.1
Author: Alberto Cavallo
Publisher: International Monetary Fund
ISBN: 1513518380
Category : Business & Economics
Languages : en
Pages : 37
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Book Description
We use micro data collected at the border and at retailers to characterize the effects brought by recent changes in US trade policy - particularly the tariffs placed on imports from China - on importers, consumers, and exporters. We start by documenting that the tariffs were almost fully passed through to total prices paid by importers, suggesting the tariffs' incidence has fallen largely on the United States. Since we estimate the response of prices to exchange rates to be far more muted, the recent depreciation of the Chinese renminbi is unlikely to alter this conclusion. Next, using product-level data from several large multi-national retailers, we demonstrate that the impact of the tariffs on retail prices is more mixed. Some affected product categories have seen sharp price increases, but the difference between affected and unaffected products is generally quite modest, suggesting that retail margins have fallen. These retailers' imports increased after the initial announcement of possible tariffs, but before their full implementation, so the intermediate passthrough of tariffs to their prices may not persist. Finally, in contrast to the case of foreign exporters facing US tariffs, we show that US exporters lowered their prices on goods subjected to foreign retaliatory tariffs compared to exports of non-targeted goods.
Author: Robert Shimer
Publisher: Princeton University Press
ISBN: 1400835232
Category : Business & Economics
Languages : en
Pages : 189
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Book Description
Labor Markets and Business Cycles integrates search and matching theory with the neoclassical growth model to better understand labor market outcomes. Robert Shimer shows analytically and quantitatively that rigid wages are important for explaining the volatile behavior of the unemployment rate in business cycles. The book focuses on the labor wedge that arises when the marginal rate of substitution between consumption and leisure does not equal the marginal product of labor. According to competitive models of the labor market, the labor wedge should be constant and equal to the labor income tax rate. But in U.S. data, the wedge is strongly countercyclical, making it seem as if recessions are periods when workers are dissuaded from working and firms are dissuaded from hiring because of an increase in the labor income tax rate. When job searches are time consuming and wages are flexible, search frictions--the cost of a job search--act like labor adjustment costs, further exacerbating inconsistencies between the competitive model and data. The book shows that wage rigidities can reconcile the search model with the data, providing a quantitatively more accurate depiction of labor markets, consumption, and investment dynamics. Developing detailed search and matching models, Labor Markets and Business Cycles will be the main reference for those interested in the intersection of labor market dynamics and business cycle research.
Author: Mancur Olson
Publisher: Yale University Press
ISBN: 0300254067
Category : Business & Economics
Languages : en
Pages : 296
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Book Description
"A compelling theory on the rationale for the changing fortunes of nations"--Publisher's website.
