Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
This paper estimates and compares New-Keynesian DSGE monetary models of the business cycle derived under two different pricing schemes—Calvo (1983) and Rotemberg (1982)—under a positive trend inflation rate. Our empirical findings (i) support trend inflation as an empirically relevant feature of the U.S. great moderation; (ii) provide evidence in favor of the statistical superiority of the Calvo setting; (iii) point to a substantially lower degree of price indexation under Calvo. We show that the superiority of the Calvo model is due to the restrictions imposed by such a pricing scheme on the aggregate demand equation.