English, Article, Journal or magazine article edition: Sticky-Price Models of the Business Cycle: Specification and Stability Peter N. Ireland

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Bookmark: http://trove.nla.gov.au/version/73430
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Sticky-Price Models of the Business Cycle: Specification and Stability
Author
  • Peter N. Ireland
Physical Description
  • preprint
Notes
  • This paper focuses on the specification and stability of a dynamic, stochastic, general equilibrium model of the business cycle with sticky prices. Maximum likelihood estimates reveal that the data prefer a version of the model in which adjustment costs apply to the price level but not to the inflation rate. Formal hypothesis tests provide evidence of instability in the estimated parameters, concentrated in the Euler equation linking consumption growth to the interest rate.
  • Sticky prices, Business Cycles
  • RePEc:boc:bocoec:426
  • This paper focuses on the specification and stability of a dynamic, stochastic, general equilibrium model of the American business cycle with sticky prices. Maximum likelihood estimates reveal that the data prefer a version of the model in which adjustment costs apply to the price level but not to the inflation rate. Formal hypothesis test detect instability in the estimated parameters, particularly in estimates of the representative household's discount factor. Evidently, more detailed descriptions of the economy are needed to explain movements in interest rates before and after 1979.
  • RePEc:nbr:nberwo:7511
Language
  • English
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