DiCecio, Riccardo (contributor); Nelson, Edward (contributor) - 2007 - Rev.
now
standard in the DSGE literature. The model incorporates both nominal frictions (sticky
prices and wages) and …, respectively.
Prices are governed by Calvo (1983) contracts, augmented by indexation to the previous
period’s inflation rate …, since the log-deviations are
computed using gross rates.
Nominal wages are staggered along similar lines to prices,
4 …