Price/Wage Staggering and Persistence

Recent literature reaches contrasting conclusions on the ability of price/wage staggering models to generate output persistence. We derive fairly general results from a stylised log-linear model which encompasses most of the microfounded model of price/wage staggering. Our results highlight the features of the underlying economy which are crucial in generating output persistence: substitutability between goods and/or labour types and factor immobility. Moreover, we show that persistence do not generally depend on the particular value assigned to the intertemporal elasticity of labour supply, which has so far been the focus of this literature