Modeling the Cyclical Behavior of Prices
Author | : Eric P. Bettinger |
Publisher | : |
Total Pages | : |
Release | : 1996 |
Genre | : Business cycles |
ISBN | : |
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Author | : Eric P. Bettinger |
Publisher | : |
Total Pages | : |
Release | : 1996 |
Genre | : Business cycles |
ISBN | : |
Author | : Xue Li |
Publisher | : |
Total Pages | : 128 |
Release | : 2015 |
Genre | : |
ISBN | : |
This paper documents business cycle facts of prices and the inflation rate for the United States from 1959:Q1 to 2013:Q3. Prices are countercyclical and the inflation rate is procyclical. In addition, prices lead the overall cycle by two quarters and the inflation rate lags the overall cycle by three quarters. To account for the observed cyclical behavior, two models are applied and extended including a business cycle model with endogenous money supply (Freeman and Huffman 1991) and a DSGE model with sticky prices (Ireland 2003). The former model only generates countercyclical prices but not procyclical inflation or the phase shift of prices relative to the overall cycle. For the latter model, its sticky-price version captures all the observed cyclical facts; whereas its flexible-price version fails to capture the procyclical behavior of inflation and the phase shift of prices relative to output. Better performance of the sticky-price model indicates that nominal rigidity can account for the cyclical behavior of prices and inflation. Thus, a powerful empirical business cycle model should incorporate a reasonable degree of price stickiness.
Author | : Bert G. Hickman |
Publisher | : |
Total Pages | : 624 |
Release | : 1972 |
Genre | : Business cycles |
ISBN | : |
Conference report on dynamically stable econometrics models of business cycles in the USA and their forecasting properties - examines methodologycal problems, analyses stochastic and non-stochastic simulations in respect of economic policy, etc., and stresses the need for further studies and research. Diagrams, references and statistical tables. Conference held in Cambridge 1969 November 14 and 15.
Author | : John P. Judd |
Publisher | : |
Total Pages | : 34 |
Release | : 1993 |
Genre | : Business cycles |
ISBN | : |
Author | : Christopher J. Nekarda |
Publisher | : |
Total Pages | : |
Release | : 2013 |
Genre | : Economics |
ISBN | : |
A countercyclical markup of price over marginal cost is the key transmission mechanism for demand shocks in textbook New Keynesian (NK) models. This paper re-examines the foundation of those models. We study the cyclicality of markups in the private economy as well as in detailed manufacturing industries. First, we show that frameworks for measuring markups that have produced the strongest evidence for countercyclicality produce the opposite result when we substitute new methods and data. Second, because the NK model's predictions differ by the nature of the shock, we present evidence on the cyclicality of the markup conditional on various types of shocks. Consistent with the NK model, we find that markups are procyclical conditional on a technology shock. However, we find that they are either procyclical or acyclical conditional on demand shocks. Thus, the textbook NK explanation for the effects of government spending or monetary policy is not supported by the behavior of the markup.
Author | : Julio Rotemberg |
Publisher | : |
Total Pages | : 128 |
Release | : 1999 |
Genre | : Business cycles |
ISBN | : |
Because inputs are scarce, marginal cost should be an increasing function of output. Without changes in this real marginal cost schedule, aggregate output can vary if and only if the markup of price over marginal cost varies. In this review, we discuss the extent to which observed fluctuations in aggregate economic activity depend upon such variations in average markups. We first study whether, empirically, real marginal cost rises in cyclical expansions. Average real labor cost is not very procyclical, but, for reasons such as overhead labor and adjustment costs, marginal labor cost should be more procyclical. Measures of marginal cost based on materials costs and inventories also appear procyclical. We next show that countercyclical markup variation may, depending upon how costs are modeled, account for a substantial fraction of cyclical output movements. We also show that the observed procyclical variations in productivity and profits are consistent with the hypothesis that cyclical variations in output are primarily due to markup variations than to shifts in the real marginal cost schedule. Finally, we survey theories of endogenous markup variation. These include both models of sticky and models in which firms' desired markup varies over time.
Author | : Bert G. Hickman |
Publisher | : |
Total Pages | : 672 |
Release | : 1937 |
Genre | : Business cycles |
ISBN | : |
Author | : Julio Rotemberg |
Publisher | : |
Total Pages | : 107 |
Release | : 1998 |
Genre | : |
ISBN | : |
Because inputs are scarce, marginal cost is an increasing function of output. Diminishing returns, costs of increasing employment as well as the increasing marginal disutility of working when hours worked and effort rise all contribute to make this function steep. Without changes in this function relating marginal cost to output, aggregate output can vary if and only if the markup of price to marginal cost (the inverse of real marginal cost for typical firms) varies. We first study whether, empirically, real marginal cost does rise in cyclical expansions. Average real labor cost is not very pro-cyclical but, for several reasons, marginal labor cost is more procyclical than average labor cost. These include the presence of overhead labor and adjustment costs as well as differences between the marginal and average wage. These corrections results in procyclical measures of real marginal cost. Measures of marginal costs based on materials costs and inventories also appear procyclical. We show that these procyclical movements in marginal cost may, depending on how costs are modeled, account for a substantial fraction of cyclical output movements. Finally, we survey models of variable markups. These include both models of sticky prices (in which markups vary because firms cannot all costlessly charge the markup they desire) and models in which firms' desired markup varies over time. This set of models allows a rich set of variables to affect output even if these variables do not shift the marginal cost schedule.
Author | : Social Science Research Council (U.S.). Committee on Economic Stability |
Publisher | : |
Total Pages | : 688 |
Release | : 1972 |
Genre | : Business & Economics |
ISBN | : 9780870142574 |
Conference report on dynamically stable econometrics models of business cycles in the USA and their forecasting properties - examines methodologycal problems, analyses stochastic and non-stochastic simulations in respect of economic policy, etc., and stresses the need for further studies and research. Diagrams, references and statistical tables. Conference held in Cambridge 1969 November 14 and 15.
Author | : Conference On Econometric Models Of Cyclical Behavior: [1969. Cambridge, Mass., U.S.A.]. |
Publisher | : |
Total Pages | : 1246 |
Release | : 1972 |
Genre | : |
ISBN | : |