It has been shown that extending the Calvo model to account for the heterogeneity in price stickiness suggested by the micro-evidence significantly improves the performance of the model. In the new model, price-changing firms are chosen disproportionately from sectors with more flexible prices....

This paper adopts the Impulse-Response methodology to understand inflation persistence. It has often been argued that existing models of pricing fail to explain the persistence that we observe. We adopt a common general framework which allows for an explicit modelling of the distribution of...

We reformulate the standard open economy new Keynesian model to include positive trend inflation and heterogeneity in price stickiness suggested by micro-data on prices. We show that when trend inflation is positive, in the standard (single sector) version of the model, increasing trade openness...

New Keynesian models have been criticised on the grounds that they require implausibly large price shocks to explain inflation. Bill, Klenow and Malin (2012) show that, while these shocks are needed to reduce the excessive inflation persistence generated by the models, they give rise to...