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!