by Ansgar » Tue Aug 18, 2015 10:48 am
Dear Johannes,
thank you very much, yes, that sounds very familiar now that you mention it. I suppose there only two ways around this then
a.) Construct a "wedge" type shock (in case of the wage markup say a wage income tax) which up to first order has identical effects to a markup shock
b.) Move away from Calvo towards price and wage adjustment costs. Although I am sure I have heard people saying that with a Rotemberg type setup, the costs of inflatiojn are smaller since there is no price dispersion...
Best,
Ansgar
P.S.: I hope you are enjoying the wonderful weather in Germany...
Ansgar Rannenberg
IMK
Tel.: +49/211/7778113