Comments: Microeconomic Rigidities and Aggregate Price Dynamics by R. Caballero and E. Engel

Article Abstract:

A study was conducted to examine the results of earlier research on the microeconomics of sticky prices. Earlier research has shown that microeconomic structures affect aggregate price behavior. However, the conclusion that such price levels change over time and respond more to positive shocks must be re-examined. Frictionless prices, the use of a univariate process model and assumption of ergodic density should be evaluated.

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The new UK monetary arrangements: a view from the literature

Article Abstract:

A study was conducted to examine the operating features of the new monetary arrangements in the UK which were introduced in May 1997. The study also analyzed the premise that the time inconsistency of policy is not a concern as long as the Bank of England is properly independent. The future of the optimal policy for the UK economic was also determined, including the correlation of the optimal policy with the Bank of England.

Banking Institutions, Depository Credit Intermediation, DEPOSITORY INSTITUTIONS, United Kingdom, Banking industry, Bank of England, Banks (Finance), Economic policy, Monetary policy

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Comments: Microeconomic Rigidities and Aggregate Price Dynamics by Ricardo Caballero and Eduardo Engel

Article Abstract:

A study was conducted to examine earlier research on aggregate price behavior. Earlier research has shown that such behavior is marked by a high degree of persistence. Goodness-of-fit criteria were used to examine an earlier model of price behavior and considered dynamic auto-correlations in the process. However, it is shown that the probability of price adjustment is conditioned by size and sign of price deviation.

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