Arbeitspapier
The Selection Effect and the Inflation-Output Variability Trade-off
It has been shown that extending the Calvo model to account for the heterogeneity in price stickiness suggested by the micro-evidence significantly improves the performance of the model. In the new model, price-changing firms are chosen disproportionately from sectors with more flexible prices. In this paper, I show that this selection effect significantly affects policy conclusions that arise from the model. In the new model, the level and the variability of inflation is higher than in the Calvo model with no selection effect. Attempting to lower inflation’s variability results in a significant increase output’s variability, without changing inflation’s variability much.
- Language
-
Englisch
- Bibliographic citation
-
Series: CESifo Working Paper ; No. 5664
- Classification
-
Wirtschaft
Macroeconomics and Monetary Economics: General
- Subject
-
DSGE models
selection effect
variance trade-off
Multiple Calvo
Calvo
- Event
-
Geistige Schöpfung
- (who)
-
Kara, Engin
- Event
-
Veröffentlichung
- (who)
-
Center for Economic Studies and ifo Institute (CESifo)
- (where)
-
Munich
- (when)
-
2015
- Handle
- Last update
-
10.03.2025, 11:45 AM CET
Data provider
This object is provided by:
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Kara, Engin
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2015
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