Staggered price setting, translog preferences, and endogenous persistence

This paper generates persistent real effects of a monetary disturbance in the context of staggered price setters. The model combines two related and reinforcing features: a translog demand structure and a particular input-output production structure, These features offer a rationale why a firm, when computing its own optimal contract price, is influenced by the prices set in other overlapping contracts. Practically, the two features interact in a positive manner and provide a way to generate significant endogenous persistence. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification: F32; E52.