Working Paper No. 02-02

How much persistence should sticky-price models generate to match U.S. data?
Martin Boileau and Marc-Andre Letendre
February 2002

ABSTRACT

A number of recent papers find that sticky-price models fail to explain the persistence of output and inflation. We argue that this failure is partially attributable to low frequency fluctuations present in post-war U.S. data, but absent from sticky-price models.

JEL classification: E30, E32.
Keywords: nominal rigidity, persistence, trend and cycle decompositions.

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