Time-varying (S, s) band models: Properties and interpretation
A recent strand of empirical work uses (S, s) models with time-varying stochastic bands to describe infrequent adjustments of prices and other variables. The present paper examines some properties of this model, which encompasses most micro-founded adjustment rules rationalizing infrequent changes....
| Main Authors: | , |
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| Format: | Journal Article |
| Published: |
Elsevier
2011
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| Online Access: | http://hdl.handle.net/20.500.11937/56127 |
| _version_ | 1848759793519427584 |
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| author | Gautier, E. Le Bihan, Herve |
| author_facet | Gautier, E. Le Bihan, Herve |
| author_sort | Gautier, E. |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | A recent strand of empirical work uses (S, s) models with time-varying stochastic bands to describe infrequent adjustments of prices and other variables. The present paper examines some properties of this model, which encompasses most micro-founded adjustment rules rationalizing infrequent changes. We illustrate that this model is flexible enough to fit data characterized by infrequent adjustment and variable adjustment size. We show that, to the extent that there is variability in the size of adjustments (e.g. if both small and large price changes are observed), (i) a large band parameter is needed to fit the data and (ii) the average band of inaction underlying the model may differ strikingly from the typical observed size of adjustment. The paper thus provides a rationalization for a recurrent empirical result: very large estimated values for the parameters measuring the band of inaction. © 2010 Elsevier B.V. |
| first_indexed | 2025-11-14T10:05:32Z |
| format | Journal Article |
| id | curtin-20.500.11937-56127 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T10:05:32Z |
| publishDate | 2011 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-561272018-03-29T09:09:01Z Time-varying (S, s) band models: Properties and interpretation Gautier, E. Le Bihan, Herve A recent strand of empirical work uses (S, s) models with time-varying stochastic bands to describe infrequent adjustments of prices and other variables. The present paper examines some properties of this model, which encompasses most micro-founded adjustment rules rationalizing infrequent changes. We illustrate that this model is flexible enough to fit data characterized by infrequent adjustment and variable adjustment size. We show that, to the extent that there is variability in the size of adjustments (e.g. if both small and large price changes are observed), (i) a large band parameter is needed to fit the data and (ii) the average band of inaction underlying the model may differ strikingly from the typical observed size of adjustment. The paper thus provides a rationalization for a recurrent empirical result: very large estimated values for the parameters measuring the band of inaction. © 2010 Elsevier B.V. 2011 Journal Article http://hdl.handle.net/20.500.11937/56127 10.1016/j.jedc.2010.10.004 Elsevier restricted |
| spellingShingle | Gautier, E. Le Bihan, Herve Time-varying (S, s) band models: Properties and interpretation |
| title | Time-varying (S, s) band models: Properties and interpretation |
| title_full | Time-varying (S, s) band models: Properties and interpretation |
| title_fullStr | Time-varying (S, s) band models: Properties and interpretation |
| title_full_unstemmed | Time-varying (S, s) band models: Properties and interpretation |
| title_short | Time-varying (S, s) band models: Properties and interpretation |
| title_sort | time-varying (s, s) band models: properties and interpretation |
| url | http://hdl.handle.net/20.500.11937/56127 |