TY  - JOUR
AU  - Bergin,Paul R.
AU  - Feenstra,Robert C.
TI  - Staggered Price Setting and Endogenous Persistence
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6492
PY  - 1998
Y2  - April 1998
UR  - http://www.nber.org/papers/w6492
L1  - http://www.nber.org/papers/w6492.pdf
N1  - Author contact info:
Paul Bergin
Department of Economics
University of California, Davis
One Shields Ave.
Davis, CA 95616
Tel: 530/752-8398
Fax: 530/752-9382
E-Mail: prbergin@ucdavis.edu

Robert C. Feenstra
Department of Economics
University of California, Davis
One Shields Avenue
Davis, CA  95616
Tel: 530/752-7022
Fax: 530/752-9382
E-Mail: rcfeenstra@ucdavis.edu
AB  - This paper generates persistent effects of a monetary disturbance in the context of staggered price-setters.  Previous research has been restricted by the CES functional form to price-setting rules that are constant markups over marginal costs.  The present paper considers a translog form for preferences and an input-output structure for production in the context of a dynamic general equilibrium model of monopolistically competitive staggered price-setters.  We derive a price-setting rule that is a function of marginal cost and also competitors' prices.  This rule better captures the interaction of price-setters envisioned in Taylor (1980) and Blanchard (1983) in their early work on staggered contracts.  The model is able to generate reasonable persistence, and also confirms the conjecture of Taylor and Blanchard that increasing the number of contracting groups increases the degree of persistence.
ER  -