In this paper we estimate a New-Keynesian DSGE model with heterogeneity in price and wage setting behavior. In a recent … study, Coibion and Gorodnichenko (2011) develop a DSGE model, in which firms follow four different types of price setting … heterogeneity in wage rigidity, such as the persistence in price and the wage inflation, which a standard New Keynesian model with …

indexed to inflation and, as a result, their investment is more sensitive to nominal price shocks. We also find that the … overall degree of nominal indexation increases with price uncertainty. An implication of this is that economies with higher … inflation uncertainty are less vulnerable to a price shock of a given magnitude. The micro predictions of the model are tested …

This paper introduces deep habits into a sticky-price sticky-wage economy and asks whether the countercyclical markup … particular, the model can account both for the price puzzle and for inflation persistence. We also show that the deep habits …

fringe; that the cartel/fringe price differential narrows as futures trading increases; and that a move to contracting lowers …