Staggered Price Setting, Translog Preferences, and Endogenous Persistence

This paper generates persistent real effects of a monetary disturbance in the context of staggered price setters. The model combines two related and reinforcing features: a translog demand structure and a particular input--output production structure. These features offer a rationale why a firm, when computing its own optimal contract price, is influenced by the prices set in other overlapping contracts. Practically, the two features interact in a positive manner and provide a way to generate significant endogenous persistence. Keyword(s): Endogenous persistence; Staggered contracts; Translog preferences