We develop the Generalized Taylor Economy (GTE) in which there are many sectors with overlapping contracts of different lengths. In economies with the same average contract length, monetary shocks will be more persistent when longer contracts are present. Using the Bils-Klenow distribution of...

This paper explores the main motivations behind new Keynesian macroeconomics in the last 15 years. It focuses on the two central issues of nominal rigidity and involuntary unemployment. It argues that the Walrasian paradigm is inherently incapable of making sense of these issues except in an ad...

We provide extensive theoretical analysis of the general equilibrium of an economy with imperfect competition in the final goods sector, endogenous production and fully flexible prices in the presence of occasionally binding cash-in-advance (CIA) constraints, under general assumptions about the...

We estimate and compare two models, the Generalized Taylor Economy (GTE) and the Multiple Calvo model (MC); that have been built to model the distributions of contract lengths observed in the data. We compare the performances of these models to those of the standard models such as the Calvo and...

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 that allows for an explicit modeling of the distribution of...

We formulate a microeconomic model of the dual-track price system for households and use it to analyze ‘transitional policy’ reforms, i.e., a rise in the plan-track price and a reduction in the plan-track quantity. Each of these reforms has a negative effect on the market price, but a...