Real and Nominal Rigidities in Price Setting

Fang Yao
This paper uses the Bayesian approach to solve and estimate a New Keynesian model augmented by a generalized Phillips curve, in which the shape of the price reset hazards can be identi…ed using aggregate data. My empirical result shows that a constant hazard function is easily rejected by the data. The empirical hazard function for post-1983 periods in the U.S. is consistent with micro evidence obtained using data from similar periods. The hazard for pre-1983...
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