quarta-feira, 1 de maio de 2013

Volatility in prices - wonkish

I read Boivin and Giannoni AER paper. It is a good read. They reconcile slow general price adjustement with Bills and Klenow evidence of an average of 4 months of price stickness when you look at micro evidence. The key thing is:most of individual price variability comes from idiosyncratic shocks unrelated to macro conditions. Running a FAVAR They show the common factor in individual prices explains a tiny part of total variance but nevertheless does display a lot of sluggishness! So we are free to continue to calibrate the calvo-parâmetro as before ! Tks guys, you are my heroes!

2 comentários:

  1. http://www.riksbank.se/Documents/Forskning/Personliga_webbsidor/2012/foe_FK_Sectoral_inflation_dynamics_final_Oct2012.pdf

    "e. We show that simple factor models do not cope well with essential features of price data. Features
    as measurement error, sales and item substitutions blow up the variance of sectoral
    shocks, while reducing their persistence. Controlling for such e§ects we Önd that in-
    áation variance is driven by both aggregate and sectoral shocks. Sectoral shocks, too,
    generate substantial ináation persistence. This has implications for the foundations of
    price stickiness."

  2. Man, i cant read this.
    X, go read the fucking paper, i guess the foundations are less secure than you thought