Notes on Price Stickiness: With Special Reference to Liability Dollarization and Credibility
Notes on Price Stickiness: With Special Reference to Liability Dollarization and Credibility
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Date
2000-12-23
Authors
Calvo, Guillermo A.
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Abstract
This paper is motivated by trying to understand the implication of price stickiness in
Emerging Market economies, EMs. The issue is important because EMs are subject to
significantly higher volatility of fundamentals than advanced countries (see Hausmann and
Rojas-Suarez (1996)). Thus, full-equilibrium relative prices are also likely to exhibit large
volatility in EMs, making price stickiness an even more critical issue in EMs than in advanced
countries.
Notes
The paper was prepared for a Plenary Session of the annual conference of the Society of
Economic Dynamics, held in San Jose, Costa Rica, June 22-24, 2000.