We give a full analytic characterization of a large class of sticky-price models where the firm’s price-setting behavior is described by a generalized hazard function. Such a function allows for a vast variety of empirical hazards to be fitted. This setup is microfounded by random adjustment costs, as in Caballero and Engel (1999), or by information frictions, as in Woodford (2009). We establish two main results. First, we show how to identify all the primitives of the model, including the distribution of the fundamental adjustment costs and the implied generalized hazard function, using the distribution of price changes. Second, we derive a sufficient statistic for the aggregate effect of a monetary shock: given an arbitrary generalized hazard function, the cumulative impulse response of output to a once-and-for-all monetary shock is proportional to the ratio of the kurtosis of the steady-state distribution of price changes over the frequency of price adjustment. We prove that Calvo’s model yields the upper bound and Golosov and Lucas’s model the lower bound on this measure in the class of random menu cost models.

The Macroeconomics of Sticky Prices with Generalized Hazard Functions / Alvarez, Fernando; Lippi, Francesco; Oskolkov, Aleksei. - In: QUARTERLY JOURNAL OF ECONOMICS. - ISSN 0033-5533. - 137:2(2022), pp. 989-1038.

The Macroeconomics of Sticky Prices with Generalized Hazard Functions

Francesco Lippi;
2022

Abstract

We give a full analytic characterization of a large class of sticky-price models where the firm’s price-setting behavior is described by a generalized hazard function. Such a function allows for a vast variety of empirical hazards to be fitted. This setup is microfounded by random adjustment costs, as in Caballero and Engel (1999), or by information frictions, as in Woodford (2009). We establish two main results. First, we show how to identify all the primitives of the model, including the distribution of the fundamental adjustment costs and the implied generalized hazard function, using the distribution of price changes. Second, we derive a sufficient statistic for the aggregate effect of a monetary shock: given an arbitrary generalized hazard function, the cumulative impulse response of output to a once-and-for-all monetary shock is proportional to the ratio of the kurtosis of the steady-state distribution of price changes over the frequency of price adjustment. We prove that Calvo’s model yields the upper bound and Golosov and Lucas’s model the lower bound on this measure in the class of random menu cost models.
The Macroeconomics of Sticky Prices with Generalized Hazard Functions / Alvarez, Fernando; Lippi, Francesco; Oskolkov, Aleksei. - In: QUARTERLY JOURNAL OF ECONOMICS. - ISSN 0033-5533. - 137:2(2022), pp. 989-1038.
File in questo prodotto:
File Dimensione Formato  
The Macroeconomics of Sticky Prices with Generalized Hazard Functions.pdf

Solo gestori archivio

Tipologia: Versione dell'editore
Licenza: Tutti i diritti riservati
Dimensione 746.54 kB
Formato Adobe PDF
746.54 kB Adobe PDF   Visualizza/Apri
Pubblicazioni consigliate

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11385/223218
Citazioni
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
social impact