Distributional dynamics under smoothly state-dependent pricing

James Costain and Anton Nakov

No 2011-50, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Starting from the assumption that firms are more likely to adjust their prices when doing so is more valuable, this paper analyzes monetary policy shocks in a DSGE model with firm-level heterogeneity. The model is calibrated to retail price microdata, and inflation responses are decomposed into \"intensive\", \"extensive\", and \"selection\" margins. Money growth and Taylor rule shocks both have nontrivial real effects, because the low state dependence implied by the data rules out the strong selection effect associated with fixed menu costs. The response to sector-specific shocks is gradual, but inappropriate econometrics might make it appear immediate.

Keywords: Pricing; -; Mathematical; models (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Related works:
Journal Article: Distributional dynamics under smoothly state-dependent pricing (2011)
Working Paper: Distributional dynamics under smoothly state-dependent pricing (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2011-50

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