Thumbnail Image
Publication

Is Rotemberg Pricing Justified by Macro Data?

Richter, Alexander W.
; 
Abstract
Structural models used to study monetary policy often include sticky prices. Calvo pricing is more common but Rotemberg pricing has become popular due to its computational advantage. To determine whether the data supports that change, we estimate a nonlinear New Keynesian model with a zero lower bound (ZLB) constraint and each type of sticky prices. The models produce similar parameter estimates and the filtered shocks are nearly identical when the Fed was not constrained, but the Rotemberg model has a higher marginal data density and it endogenously generates more volatility at the ZLB, which helps explain data from 2008–2011.
Description
Date
2016
Journal Title
Journal ISSN
Volume Title
Publisher
Economics Letters
Collections
Economics
Show all metadata
Download Dataset
Files
Thumbnail Image
RT_Pricing_Comparison.pdf
Adobe PDF, 142.81 KB
Rights Holder
Usage License
Embargo
Research Projects
Organizational Units
Journal Issue
Keywords
Citation
Richter, Alexander W., and Nathaniel A. Throckmorton. “Is Rotemberg Pricing Justified by Macro Data?” Economics Letters 149 (2016): 44–48. https://doi.org/10.1016/j.econlet.2016.10.011
Advisor
Department
DOI
https://doi.org/10.1016/j.econlet.2016.10.011
URI
https://scholarworks.wm.edu/handle/internal/19630
Embedded videos