Staggered contracts and persistence : microeconomic foundations and macroeconomic dynamics

Macroeconomic Evidence and Microeconomic Foundations

Staggered Contracts and Business Cycle Persistence

Staggered price and staggered wage contracts are commonly viewed as similar mechanisms in generating persistent real effects of monetary shocks. In this paper, we distinguish the two mechanisms in a dynamic stochastic general equilibrium framework. We show that, although the dynamic price setting and wage setting equations are alike, a key parameter governing persistence is linked to the underl...

Staggered Price Contracts and Inflation Persistence: Some General Results

Despite their popularity as theoretical tools for illustrating the effects of nominal rigidities, some have questioned whether models based on Taylor-style staggered contracts can match the persistence of the empirical inflation process. This paper presents some general theoretical results about Taylor-style models. It is shown that these models do not have a problem matching high autocorrelati...

Macroeconomic forecasts and microeconomic forecasters

In the presence of principal-agent problems, published macroeconomic forecasts by professional economists may not measure expectations. Forecasters may use their forecasts in order to manipulate beliefs about their ability. I test a cross-sectional implication of models of reputation and information-revelation. I find that as forecasters become older and more established, they produce more radi...

Price Rigidity: Microeconomic Evidence and Macroeconomic Implications

We review recent evidence on price rigidity from themacroeconomics literature and discuss how this evidence is used to inform macroeconomic modeling. Sluggish price adjustment is a leading explanation for the large effects of demand shocks on output and, in particular, the effects of monetary policy on output. A recent influx of data on individual prices has greatly deepenedmacroeconomists’ und...