Generalised Taylor and Generalised Calvo Price and Wage Setting

Micro‐evidence with Macro Implications

Bibliographic Data

ID9715209
AuthorsHuw Dixon (Cardiff Business School, Cardiff, UK), Huw David Dixon (0000-0002-9875-8965, Cardiff University), Hervé Le Bihan (Banque de France, DGEI‐DEMS, Service des Analyses Microéconomiques (SAMIC))
Year2012
Volume122
Issue560
Pages532-554
Publication date2012-05-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.1111/j.1468-0297.2012.02497.x
OpenAlexW3200870338
LanguageEN
Citations received2
References cited24

The Generalised Calvo and the Generalised Taylor models of price and wage setting are, unlike the standard Calvo and Taylor counterparts, exactly consistent with the distribution of durations observed in the data. Using price and wage micro-data from a major euro area economy (France), we develop calibrated versions of these models. We assess the consequences for monetary policy transmission by embedding these calibrated models in a standard dynamic stochastic general equilibrium model. The Generalised Taylor model is found to help rationalise the hump-shaped and persistent response of inflation, without resorting to the counterfactual assumption of systematic wage and price indexation. © 2012 The Author(s). The Economic Journal © 2012 Royal Economic Society

Central bank · Counterfactual thinking · Dynamic stochastic general equilibrium · Econometrics · Economics · Indexation · Inflation (cosmology · Inflation targeting · Labour economics · Macro · Macroeconomics · Microeconomics · Monetary policy · Price setting · Taylor rule · Wage · Computer Science · Economic theories and models · Economic Theory and Policy · Monetary Policy and Economic Impact

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