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Are Prices Sticky? A Study On Lithuanian Macro Data

Norkute, Milda LU (2010) NEKM06 20102
Department of Economics
Abstract
In this essay, the degree of price rigidity was evaluated on Lithuanian macro data. For this purpose, a Calvo-type sticky price optimizing agent model was employed as theoretical background, guiding to the New Keynesian Phillips Curve (NKPC). The results of econometric analysis revealed, that real marginal costs do drive short-run inflation in Lithuania if unit labor costs are employed as a proxy. The average time between price changes based on structural estimation results was obtained equal from three to seven quarters depending on model specification as well as assumption about real marginal costs. Hence, the implication was drawn that there is a strong macro data based evidence of the degree of price stickiness during the time period... (More)
In this essay, the degree of price rigidity was evaluated on Lithuanian macro data. For this purpose, a Calvo-type sticky price optimizing agent model was employed as theoretical background, guiding to the New Keynesian Phillips Curve (NKPC). The results of econometric analysis revealed, that real marginal costs do drive short-run inflation in Lithuania if unit labor costs are employed as a proxy. The average time between price changes based on structural estimation results was obtained equal from three to seven quarters depending on model specification as well as assumption about real marginal costs. Hence, the implication was drawn that there is a strong macro data based evidence of the degree of price stickiness during the time period from 1996Q4 to 2009Q4. (Less)
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author
Norkute, Milda LU
supervisor
organization
course
NEKM06 20102
year
type
H1 - Master's Degree (One Year)
subject
keywords
Sticky prices, Calvo-type model, NKPC, GMM
language
English
id
1699067
date added to LUP
2010-12-13 08:59:14
date last changed
2010-12-13 08:59:14
@misc{1699067,
  abstract     = {In this essay, the degree of price rigidity was evaluated on Lithuanian macro data. For this purpose, a Calvo-type sticky price optimizing agent model was employed as theoretical background, guiding to the New Keynesian Phillips Curve (NKPC). The results of econometric analysis revealed, that real marginal costs do drive short-run inflation in Lithuania if unit labor costs are employed as a proxy. The average time between price changes based on structural estimation results was obtained equal from three to seven quarters depending on model specification as well as assumption about real marginal costs. Hence, the implication was drawn that there is a strong macro data based evidence of the degree of price stickiness during the time period from 1996Q4 to 2009Q4.},
  author       = {Norkute, Milda},
  keyword      = {Sticky prices,Calvo-type model,NKPC,GMM},
  language     = {eng},
  note         = {Student Paper},
  title        = {Are Prices Sticky? A Study On Lithuanian Macro Data},
  year         = {2010},
}