Article ID Journal Published Year Pages File Type
5067120 European Economic Review 2011 13 Pages PDF
Abstract

We develop the generalized Taylor economy (GTE) in which there are many sectors with overlapping contracts of different lengths. In economies with the same average contract length, monetary shocks will be more persistent when longer contracts are present. Using the Bils-Klenow distribution of contract lengths, we find that the corresponding GTE tracks the U.S. data well. When we choose a GTE with the same distribution of completed contract lengths as the Calvo, the economies behave in a similar manner.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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