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....

During the Great Recession, despite the large fall in output, inflation did not fall much. This is known as the missing deflation puzzle. In this paper, we develop and estimate a New Keynesian Dynamic Stochastic General Equilibrium model to provide an explanation for the puzzle. The new model...

We develop the Generalized Taylor Economy (GTE) in which there are many sectors with overlapping contracts of di§erent 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...