Evaluating the Calvo Model of Sticky Prices

Can variants of the classic Calvo (1983) model of sticky prices account for the statistical behavior of post-war US inflation? We develop and test versions of the model for which the answer to this question is yes. We then investigate whether these models imply plausible degrees of inertia in price setting behavior by firms. We find that they do, but only if we depart from two auxiliary assumptions made in standard expositions of the Calvo model. These assumptions are that monopolistically competitive firms face a constant elasticity of demand and capital can be instantaneously reallocated after a shock. When we modify these assumptions our model is consistent with the view that firms re-optimize prices

How does an increase in government purchases affect economy?

This article studies the impact on aggregate economic activity of increases in defense purchases which are unrelated to other developments in the economy. The authors use empirical evidence to evaluate the predictions of several prominent models.Economic development ; Macroeconomics ; Labor market ; Expenditures, Public ; Defense industries

Evaluating the Calvo model of sticky prices

This paper studies the empirical performance of a widely used model of nominal rigidities: the Calvo model of sticky goods prices. We describe an extended version of this model with variable elasticity of demand of the differentiated goods and imperfect capital mobility. We find little evidence against standard versions of the model without the extensions, but the estimated frequency of price adjustment is implausible. With the extended model the estimates are more reasonable. This is especially so if the sample is split to take into account a possible change in monetary regime around 1980.Prices

Testing the Calvo model of sticky prices

This article discusses the empirical performance of a widely used model of nominal rigidities: the Calvo model of sticky good prices. The authors argue that there is overwhelming evidence against this model. But this evidence is generated under three key assumptions: one, there is no lag between the time firms reoptimize their price plans and the time they implement those plans; two, there is no measurement error in inflation; and three, monetary policy is the same in the pre-1979 and post-1982 periods. The authors discuss the impact of relaxing each of these assumptions.Prices ; Macroeconomics

Fiscal shocks in an efficiency wage model

This paper illustrates a particular limited information strategy for assessing the empirical plausibility of alternative quantitative general equilibrium business cycle models. The basic strategy is to test whether a model economy can account for the response of actual economy to an exogenous shock. Here we concentrate on the response of aggregate hours worked and real wages to a fiscal policy shock. The fiscal policy shock is identified with the dynamic response of government purchases and averages marginal income tax rates to an exogenous increase in military purchases. Burnside, Eichenbaum and Fisher (1999) show that standard Real business Cycle models cannot account for the salient features of how hours worked and after - tax real wages respond to a fiscal policy shock. In this paper we show that this failure extends to a class of business cycle models in which the labor is characterized by efficiency wages.Fiscal policy ; Wages

Fiscal Shocks in an Efficiency Wage Model

This paper analyzes the ability of a general equilibrium efficiency wage model to account for the estimated response of hours worked and of real wages to a fiscal policy shock. Our key finding is that the model cannot do so unless we make the counterfactual assumption that marginal tax rates are constant. The model shares the strengths and weaknesses of high labor supply elasticity Real Business Cycle models. In particular it can account for the conditional volatility of real wages and hours worked. But it cannot account for the temporal pattern of how these variables respond to a fiscal policy shock and generates a counterfactual negative conditional correlation between government purchases and hours worked.

Improved Information Outage Rate in Certain MIMO Systems

We propose a simple class of encoding/decoding techniques which can be used to improve the information outage rate of certain multiple-input multiple-output (MIMO) systems. Gains in outage rate can be achieved at low to moderate signal to noise ratios in MIMO systems which have fewer receive antennas than transmit antennas. This performance improvement is due to extra ``virtual'' receive antennas which are created with low complexity signal processing. A simple space-time block code system using virtual receive antennas is also investigated

Complete two-loop effective potential approximation to the lightest Higgs scalar boson mass in supersymmetry

I present a method for accurately calculating the pole mass of the lightest Higgs scalar boson in supersymmetric extensions of the Standard Model, using a mass-independent renormalization scheme. The Higgs scalar self-energies are approximated by supplementing the exact one-loop results with the second derivatives of the complete two-loop effective potential in Landau gauge. I discuss the dependence of this approximation on the choice of renormalization scale, and note the existence of particularly poor choices which fortunately can be easily identified and avoided. For typical input parameters, the variation in the calculated Higgs mass over a wide range of renormalization scales is found to be of order a few hundred MeV or less, and is significantly improved over previous approximations.Comment: 5 pages, 1 figure. References added, sample test model parameters listed, minor wording change

UV/IR Mixing for Noncommutative Complex Scalar Field Theory, II (Interaction with Gauge Fields)

We consider noncommutative analogs of scalar electrodynamics and N=2 D=4 SUSY Yang-Mills theory. We show that one-loop renormalizability of noncommutative scalar electrodynamics requires the scalar potential to be an anticommutator squared. This form of the scalar potential differs from the one expected from the point of view of noncommutative gauge theories with extended SUSY containing a square of commutator. We show that fermion contributions restore the commutator in the scalar potential. This provides one-loop renormalizability of noncommutative N=2 SUSY gauge theory. We demonstrate a presence of non-integrable IR singularities in noncommutative scalar electrodynamics for general coupling constants. We find that for a special ratio of coupling constants these IR singularities vanish. Also we show that IR poles are absent in noncommutative N=2 SUSY gauge theory.Comment: 9 pages, 16 EPS figure