State-dependency and firm-level optimization: a contribution to Calvo price staggering

Arbeitspapier

We implement a tractable state-dependent Calvo price-setting signal dependent on inflation and aggregate competitiveness. This allows us to derive a New Keynesian Phillips Curve (NKPC) expressed in terms of the actual levels of variables - rather than in-deviation from “steady state” form - and thus a specification which is not regime-dependent. A consequence of our approach is that ex-ante all firms face the same optimization problem. This state-dependent NKPC nests the conventional hybrid NKPC form as a special case. Finally, we demonstrate the uefulness of our approach by, first, analyzing the persistence and variability of inflation shocks under different inflation regimes and then comparing our state-dependent and timedependent NKPCs on US data.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 806

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation ; Business Fluctuations; Cycles
• Subject: Calvo Price Staggering ; Firm-Level Optimization ; New Keynesian Phillips Curves ; Regime Dependency+ ; State-Dependency ; Marktmechanismus ; Preismanagement ; New-Keynesian Phillips Curve ; Inflationserwartung ; Theorie ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): McAdam, Peter ; Willman, Alpo
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/153240
• Last update: 10.03.2025, 11:43 AM CET